With the U.S. debt crisis over for a few months it is now the Fed that will drive the dollar and expectations for when the Fed will end stimulus or at least taper. The wrangling in Congress has done serious damage to the view that the Fed will taper anytime soon. Perhaps Bernanke can even stay in office until the end of his term and arguably do nothing. In hindsight for the economy, the Sept 18 Fed decision to do nothing ahead of the shutdown was probably correct at least for the economy.
But the Fed does have to end stimulus and it is now more likely to come next year. But it will stay data driven with non-farm payrolls probably the most critical data point, at least for FX markets.
The dollar was always going to be weak this quarter, it is down against 31 of the most actively traded dollar pairs. But weakness is now likely to extend into the new year. More so since tapering is unlikely and why would you make any large bets on the dollar given that in two and three months we may again be facing the very issues we have faced over the last two weeks. Does anyone have that much confidence in Congress. The Republicans were bloodied but they may be willing to be bloodied again.