LONDON - The dollar laboured near a
three-year low against a basket of currencies on Friday, heading
for a fifth week of falls that would be its longest losing
streak since May 2015.
The U.S. currency slipped to its lowest since December 2014
this week, with investors selling on the view that other central
banks will join the Federal Reserve in looking to raise
ultra-low interest rates adopted to combat the 2008 global
financial crisis and subsequent recessions.
The dollar index stayed close to those levels on Friday,
with fears of a potential U.S. government shutdown also
weighing. It was 0.3 percent on the day at 90.243, just
off Thursday's low of 90.113. It has lost about 2 percent so far
in 2018.
The U.S. House of Representatives passed a bill on Thursday
to fund government operations through to Feb. 16 and avoid
agency shutdowns this weekend when existing allocations expire.
The bill has yet to be approved by the Senate, where it faces an
uncertain future.
"Odds of a U.S. government shutdown have risen sharply in
the past 24 hours," said ING currency strategist Viraj Patel.
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"While we would expect such noise to keep the dollar on the
back foot, any fundamental fallout at this stage would seem
premature – not least as history tends to show that some sort of
conciliatory approach to keep the government functioning in the
long-run will ultimately prevail within Congress."
The prospect of Senate approval has been complicated by
President Donald Trump saying that an extension of funding for
the children's health insurance programme, a Democratic
priority, should not be included.
The euro edged up 0.3 percent to $1.2276, near a
three-year high of $1.2323 struck on Wednesday. Having advanced
more than half a percent this week, the common currency could
post a fifth consecutive week of gains.
The dollar slipped by half a percent to 110.60 yen,
with its rebound from Wednesday's four-month low of 110.19
already fading despite a rise in U.S. debt yields.
A tiny reduction in the Bank of Japan's bond buying this
month was enough to spark speculation about possible
modification of policy, even though many market players think
any move will be many months away.
"Markets are increasingly sensitive to the prospect of a
less-dovish BOJ, which is putting pressure on dollar/yen,"
analysts at UBS Wealth Management said in a note, adding that
they will be looking to the BOJ's policy meeting next week to
gain more clarity on the central bank' stance.
"For now, we do not think the BOJ has any urgency to shift
its yield curve control regime," they added.
Another underlying factor behind the dollar's weakness has
been global investors, including sovereign wealth funds and
central banks, diversifying their holdings by switching more
funds into other currencies.