Dollar declines to record on u.s. Deficit deadlock

The dollar fell against all of its most-traded counterparts as politicians struggled to agree on raising the U.S. debt ceiling and reducing its deficit.

The greenback slid below 78 yen for the first time since March and fell to a record versus the Swiss franc on concern America may default and face a reduction in its credit rating. The pound rallied to a one-month high against the dollar after the U.K.’s economic growth matched the forecasts of analysts. Sweden’s currency gained as producer prices increased.

“The dollar is selling off and will weaken every single day until we have some sort of resolution,” said Greg Salvaggio, senior vice president of capital markets in Washington at the currency-trading firm Tempus Consulting Inc. “The bigger issue is not necessarily the deal, it’s the scope of the deal. Without $3 trillion in cuts or deficit reductions, there’s a high probability S&P will downgrade U.S. debt, and then all bets are off.”

The dollar fell 0.5 percent to 77.89 yen at 5 p.m. in New York, from 78.29 yesterday, after sliding to 77.83, the lowest level since March 17. The greenback dropped 0.6 percent to 80.13 Swiss centimes after touching the all-time low of 79.98. The dollar slid 0.9 percent to $1.4511 versus the euro after reaching $1.4526, the weakest since July 5.

Source: Bloomberg Business Week