The euro commenced the New York session (8:00 am) at 1.3602, mid-way in the Asian European combined ranges. A brief dip to 1.3593 had already reversed to 1.3601 at the 8:30 am release of U.S. initial jobless claims which at 308,000 was slightly better than the 315,000 forecast. The euro peaked a few minutes later at 1.3614, then dropped again over the next 45 minutes to 1.3587. As the euro crossed back over 1.3600 strong buy orders kicked and then a minute later the weaker than predicted September services ISM (54.4 vs. expected 57.0, August 58.6) vaulted the pair to 1.3627 in under five minutes.
Behind the statistics was the continuing budget battle and partially closed government in Washington. The lack of progress on the budget makes the far more dangerous deficit limit showdown in two weeks an object of increasing market concern. President Obama was again harshly critical of the Republicans and the two sides seemed to be no closer to resolution than when this drama began three days ago.
Stocks traded lower all day and the general bias against the dollar that has taken hold with the evolution of this dispute was unabated. Sell stops in dollar/chf around the London close helped to drive the euro to 1.3646, the day's top but the turn was quick as the dollar selling pressure waned.
The euro had subsided before New York Times reported that House Speaker and Republican Leader John Boehner said that he would not allow a U.S. default, this brought the euro to 1.3620, where it closed.
Dollar/yen began the U.S. market at 97.68 and euro/yen at 132.87 (8:00 am) and both edged lower as defensive dollar selling continued to be the market default. The slow descent to 97.55 and 132.60 picked up speed with the release of the weaker than predicted September services ISM (see above) which pressed the rates steadily down 97.25 and 132.45, before some profit interest provided a temporary floor.
Losses in equities and a sharp jump in risk markets, the VIX index moving sharply higher, and an aggressive speech by President Obama critical of Republicans outlined the lack of progress on the budget impasse and the danger ahead from the deficit limit in two weeks, and kept pressure on the U.S. currency. Selling in gbp/yen and usd/yen itself at the London close forced the dollar/yen to its low of 96.93 and eur/yen to 132.16 a few minutes later.
Comments from House Speaker Boehner that he would not permit the U.S. to default, brought stocks back from their worst levels, and steadied the dollar around 97.25 and the cross at 132.50, where they had paused before the selling at the London close. Dollar/yen closed at 97.25 and the eur/yen at 132.46.