The euro held steady against the dollar on Wednesday as solid German data was offset by concerns about a possible U.S. government shutdown and uncertainty over euro zone monetary policy.
Congressional authorization for the U.S. government to spend money runs out on September 30, unless Congress passes a “continuing resolution” to keep the government running. U.S. politicians have not yet found a common ground.
Analysts said failure to reach agreement would probably lend the dollar safe-haven support against riskier currencies, including the euro.
The euro was steady at $1.3479, having dropped from a peak of $1.3569 hit last week after the U.S. Federal Reserve’s surprise decision to keep its bond-buying stimulus intact.
Data showing German consumer confidence at a six-year high helped underpin the euro but traders said a drop below chart support at $1.3450 could herald further losses.
“There are so many uncertainties, over policy and over the U.S. debt ceiling negotiations and renewed signs of slowing in China. This is making people reluctant to go back into risk,” said Ian Stannard, head of European currency strategy at Morgan Stanley.
He added that the risk of a potential U.S. government shutdown should provide the dollar with near-term support.
A lack of clarity over how long the U.S. central bank would delay scaling back its bond-buying stimulus and comments by European Central Bank President Mario Draghi this week about the possibility of the ECB providing more cheap long-term loans have pinned down the dollar and the euro.
The dollar was steady against a basket of currencies .DXY at 80.563. Against the yen, it dipped 0.1 percent to 98.63 yen, pressured by an easing in U.S. bond yields after weaker economic data. <US/>
“In the end, I think the dollar will break higher, but U.S. bond yields will have to rise for that to happen,” said a trader for a Japanese bank in Singapore, adding that such moves were unlikely to occur immediately.
“For now, everybody is cautious on the (U.S.) economy, in the wake of the FOMC,” he said, referring to last week’s Fed policy meeting.
The New Zealand dollar fell 0.6 percent to $0.8230 after government data showed the country’s trade deficit soared to its highest level in five years.
Source : Reuters