Dollar Set for Weekly Drop on Shutdown; Yen Advances Before BOJ
By Kevin Buckland and Candice Zachariahs
Oct. 4 (Bloomberg) -- The dollar headed for a third weekly decline against the yen as the U.S. government shutdown delayed a key jobs report, clouding the outlook for when the Federal Reserve will taper stimulus.
The greenback traded near an eight-month low versus the euro after Atlanta Fed President Dennis Lockhart said the shortage of data “would tend to make me somewhat more cautious” about reducing the pace of bond purchases. The yen advanced before the conclusion of a Bank of Japan meeting today that’s expected to result in no expansion of monetary policy.
“The big problem is the issue with the debt ceiling, and then really, it’s the effect the shutdown has on data releases, which means the Fed has nothing to work with,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney. “Tapering is going to be pushed further and further back, and that’s bad for the dollar.”
The dollar weakened 0.1 percent to 97.16 yen as of 10:29 a.m. in Tokyo from yesterday. It was little changed at $1.3624 per euro after yesterday reaching $1.3646, the weakest level since Feb. 4. For the week, the dollar has dropped 1.1 percent versus the yen and 0.8 percent against Europe’s shared currency.
The first partial government shutdown in 17 years has delayed three economic releases this week, including the monthly payrolls report. U.S. lawmakers need to agree on raising the debt limit to avoid a default after Oct. 17.
President Barack Obama said there is only “one way out” of the shutdown -- for Republican House Speaker John Boehner to allow a vote on a stopgap spending bill without conditions.
Democrats, including Obama, say Republicans must end the shutdown and raise the debt ceiling as a precondition to talks on broader budgetary disputes. Republicans want to use the fiscal deadlines to extract changes to Obama’s health-care law and other policy concessions.
Failure to raise the debt limit has “the potential to be catastrophic,” the Treasury Department warned in a report yesterday that said credit markets could freeze and the value of the dollar could plummet.
BlackRock Inc.’s Larry Fink and Pacific Investment Management Co.’s Bill Gross said the U.S. debt standoff will be resolved without a default. The congressional dispute will be worked out “very rapidly,” Fink said at a Beverly Hills, California, event. Gross said a default is “not a realistic proposition.”
In Japan, the central bank will leave policy unchanged at the conclusion of a two-day meeting today, according to all 35 economists surveyed by Bloomberg News. BOJ Governor Haruhiko Kuroda will hold a news conference following the decision.
Kuroda in April unveiled a plan to buy more than 7 trillion yen ($72 billion) of bonds a month to achieve 2 percent inflation in two years, helping drive the yen down more than 10 percent this year.