Speaking overnight, International Monetary Fund head Christine Lagarde said the failure to raise the U.S. debt ceiling could hurt the global economy and warned U.S. growth could drop below 2% this year. Separately, Standard & Poor’s rating agency said the standoff over funding the government and increasing the borrowing limit is “unlikely to change” S&P’s AA plus rating on U.S. debt. During the U.S. session, the dollar initially fell against the yen, but rallied later in the session, with USD/JPY closing up 0.15% to 97.42.
The yen was further supported after the Bank of Japan held back from adding to its monetary stimulus program after Japan Prime Minister Shinzo Abe said the economy was strong enough to weather a sales-tax increase. The news disappointed markets who had been expecting a more aggressive stance from the bank. Meanwhile the euro gave up some of yesterdays gains against the dollar, as investors locked in profits after the single currency rallied to eight-month highs on Thursday.
The single currencies was further hampered after official data showed that producer price inflation in Germany hit a three year low, falling 0.1% in August, confounding expectations for a 0.1% rise, after a 0.1% slip the previous month. EUR/USD ended the session down 0.43% to 1.3560. In Canada, the Loonie strengthened after the release of data which showed that the Ivey purchasing managers’ index ticked up to 51.9 in September, from a reading of 51.0 the previous month, confounding expectations for a rise to 53.0. USD/CAD edging down 0.35% to 1.0296.
Elsewhere, the greenback was broadly lower against the Australian and New Zealand dollars, with AUD/USD gaining 0.42% to 0.9434 and NZD/USD rising 0.45% to 0.8330. - See more at: http://www.forexnews.com/blog/2013/10/04/dollar-remains-lower-government-impasse-continues-top-forex-news/#sthash.z8Qp3wZs.dpuf
