Monday 27 January 2020

Debt-ceiling deal fails to prevent dollar slide

Caroline Valetkevitch

The dollar fell and Treasuries gained as relief over a US budget deal shifted to focus on the effect of the 16-day government shutdown on the American economy and prospects of a re-run early next year.

Analysts said economic weakness resulting from the shutdown and uncertainty over the next round of budget and debt negotiations may keep the Federal Reserve from withdrawing monetary stimulus at least until a few months into the year.

With relief tempered by the fact that the new deal is a temporary fix, US stocks were mixed. IBM shares hit a two-year low a day after it reported a 4pc drop in third-quarter revenue, which was weaker than expected.

The shares were down 6pc at $175.55.

US President Barack Obama has now signed legislation to fund the government until January 15 and extend a debt-ceiling deadline to February 7, pulling the world's biggest economy back from the brink of a historic default.

The move did little, however, to resolve the underlying disputes that led to the crisis in the first place. The temporary nature of the agreement and longer-term worries that the debt-ceiling risks would become a structural drag on the economy left significant unease for investors.

The dollar index was down 1pc at 79.700, well off a one-month high of 80.754 struck on Wednesday. Against the yen, it lost 0.9pc to trade at 97.83 yen, pulling back from a three-week high of 99.00 yen set earlier in the global day.

The dollar's trough against the yen was the lowest in a week and the largest percentage fall in a month.

Irish Independent

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