The dollar slid toward a record low against the Swiss franc after U.S. lawmakers failed to agree on raising the nation’s $14.3 trillion debt ceiling, boosting the odds of a default as soon as next week. The franc and yen rose against all of their major peers as Republicans prepared to force action on a shorter-term extension of the debt limit than President Barack Obama has requested, spurring demand for the currencies as havens. Gains by the yen were limited on speculation Japan will intervene in markets to stop its appreciation. The Australian dollar fell as stock losses damped demand for higher-yielding assets. “U.S. dollar down, Swiss franc higher is the most obvious trade on the back of a disappointment,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp, Australia’s second-largest lender. “A half-baked answer would probably also be disappointing to the markets. They’re looking for a solution that’s not just short term but something long term, and that’s what the ratings agencies have said they want.” The dollar fell to 81.28 Swiss centimes as of 1:08 p.m. in Tokyo from 81.92 last week, and reached a record low 80.33 centimes on July 18. The greenback fetched 78.38 yen from 78.54 after touching 78.12 yen, the least since March 17. The U.S. currency dropped to $1.4381 versus the euro from $1.4360 last week. The yen was little changed at 112.72 per euro. The franc gained 0.8 percent today, making it the best performer according to Bloomberg Correlation-Weighted Currency Indexes. The yen added 0.2 percent, while the dollar is down 0.1 percent. Block Obama House Speaker John Boehner plans to press ahead with a shorter-term increase in the debt ceiling, he told lawmakers, defying a veto threat by Obama and signaling continued stalemate in the U.S. Congress. Treasury officials project the debt limit will be exhausted Aug. 2. Boehner told Republican lawmakers during a conference call that they needed to pull together as a team to block Obama. His remarks were described on condition of anonymity by a person familiar with the discussion. Obama would veto a deal to raise the debt ceiling if it doesn’t extend the limit into 2013, White House Chief of Staff Bill Daley said in an interview on NBC’s “Meet the Press.” Impact ‘Muted’ The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, fell 0.1 percent to 74.157. The index reached 73.889 on July 21, the lowest since June 9. America may lose its top credit rating as early as August because of the risk that Congress will agree to limited reductions in the budget deficit compared with $3 trillion to $4 trillion in cuts recommended by Standard & Poor’s and Moody’s Investors Service, according to Mansoor Mohi-uddin, the Singapore-based chief currency strategist at UBS AG. “While clearly a blow to U.S. prestige, the impact on the dollar may be muted,” he wrote in a note to clients. “Central banks will not sell Treasuries given their need to hold foreign- exchange reserves in liquid assets.” Investors outside the U.S. own $4.51 trillion in U.S. Treasuries, or about 50 percent of the marketable government debt outstanding, according to the Treasury Department. Gains in the yen were limited after it reached levels that spurred coordinated selling of the currency in March. Bank of Japan Governor Masaaki Shirakawa said today that the yen’s gains could hurt the economy and the central bank is ready to take appropriate action as needed. ‘Possible Intervention’ “Policy makers have to signal a possible intervention," said Junichi Ishikawa, a Tokyo-based market analyst at IG Markets Securities Ltd. ‘‘Yet, that won’t be powerful enough to create a trend.’’ Group of Seven nations jointly sold the yen on March 18 after it reached a postwar record of 76.26 to the dollar the previous day, saying in a statement they wanted to reduce ‘‘excess volatility and disorderly movements." Japan’s Finance Ministry sold 692.5 billion yen ($8.8 billion) that month in its first currency intervention since September. Australia’s dollar dropped against the U.S. currency, snapping a four-day gain. The MSCI Asia Pacific Index of Asian shares lost 1 percent, and Standard & Poor’s 500 futures expiring in September also retreated 1 percent. The Aussie fell 0.4 percent to 84.84 yen. It declined to $1.0824 from $1.0851 in New York on July 22. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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