New York—The dollar firmed against the euro but fell against other major currencies Thursday as traders kept an eye on political wrangling and debt crises on both sides of the Atlantic. The European single currency fell to $1.4324 around 2100 GMT, from $1.4363 at the same time in New York on Wednesday.
The dollar dropped to 77.74 yen from 77.96 yen. The US currency was under pressure amid political gridlock in Washington over raising the country’s $14.29 trillion debt ceiling, just five days before a potential debt default. After the US government hit the limit on May 16, the Treasury said that if the ceiling were not lifted by August 2, it could have to renege on expected payments, potentially leading to the loss of the United States’s coveted triple-A credit rating.
“As the clock ticks on and the August 2nd deadline approaches, investors, traders, economists and other analysts are bracing for the worst and preparing for doomsday,” said Kathy Lien, head of research at GFT. “Discussions in the markets today centered on the question ‘What If.’ That is, ‘What if the US government defaulted on its debt?’ and ‘What if the US credit rating was downgraded?’”
President Barack Obama’s Democrats and opposition Republicans remained at loggerheads Thursday over deficit-reduction plans in Congress tied to raising the debt limit. “Unfortunately as things now stand, a deal before the weekend is very unlikely and for this reason, we expect the US dollar to remain under pressure,” Lien said.
The dollar fell to a new record low against the safe-haven Swiss franc, at 0.7990 francs. By late Thursday the greenback recovered to 0.8010 francs, down from 0.8014 Wednesday. The US currency also weakened against the British pound, which bought $1.6361, compared to $1.6328 the previous day.—AFP
