© Reuters. FILE PHOTO: An illustration showing a US $100 banknote is taken in Tokyo on August 2, 2011. REUTERS/Yuriko Nakao
Written by Herbert Lash and Elon John
NEW YORK/LONDON (Reuters) – The dollar was little changed after hitting a two-month high against a basket of peers on Wednesday, as concern over U.S. debt ceiling negotiations sent investors to safe havens, while sticky inflation data in Britain hurt sterling. . .
The impasse in Washington over debt ceiling negotiations has helped lift the dollar, though it could lead to a default and tip the US economy into recession as investors fear it could lead to worse problems for the global economic outlook.
Equity markets around the world also fell due to uncertainty, but the impact on the dollar was less than interest rates and stocks, said Mark Chandler, chief market strategist at Bannockburn Global Forex in New York.
“The US dollar has been rising more or less for three weeks, helped by stronger-than-expected data and higher US interest rates,” he said. “I don’t think the debt ceiling has been a big factor in the foreign exchange market per se.”
Which measures the greenback against six major pairs, tumbled after earlier touching 103.77, its highest since March 20. The index was recently up 0.106%, at 103.64.
Economic data may continue to support the dollar, Chandler said, as the Federal Reserve Bank of Atlanta expects the US economy to grow at a rate of 2.9% in the second quarter.
“My feeling is we didn’t get an agreement until the last minute anyway, which means not Memorial Day, but sometime early next week,” he said.
The pound fell to a one-month low against the dollar at $1.23645 and was last just above that, down 0.19%, after data showed British inflation slowed by far less than markets had expected.
The British currency lost ground against the Euro as well, which was last down 0.25% at 1.1492. ()
Core eurozone services inflation reported on Tuesday remained high, hurting Sweden, as the European Central Bank prepares to raise interest rates in June and July.
Meanwhile, the New Zealand dollar fell after the central bank indicated that it had tightened rates after raising interest rates by 25 basis points to the highest level in more than 14 years.
The dollar strengthened 0.48% against the crown, while the New Zealand dollar fell 2.03% against the greenback, to 0.61210.
Rising inflation, which has led to longer BoE interest rate hikes, has supported the pound in recent months, but that relationship is now beginning to reverse.
“We are now in the area where if the Bank of England is meeting market expectations and taking interest rates that low, then we are talking about a deterioration in the investment outlook in the UK, and with financial stability considerations taken into account, which is a negative for Currency Analysts,” said Simon Harvey, head of currency analysis. Foreign in Monex Europe British Originals.
================================================== == ======
Coin offer prices at 10:05 am (1405 GMT)
Description RIC Last US Close Pct Change YTD Pct High Bid Low Bid
previous change
a class
Dollar Index 103.6400 103.5400 +0.11% 0.145% +103.7700 +103.3400
EUR/USD 1.0776 USD 1.0771 + 0.05% + 0.57% + 1.0801 USD + 1.0748 USD
USD/JPY 138.8600 138.5950 +0.21% +5.93% +138.8800 +138.2350
EUR/JPY 149.62 149.25 +0.25% +6.64% +149.7300 +148.8500
USD/CHF 0.9048 0.9016 +0.37% -2.14% +0.9050 +0.9005
GBP/USD $1.2381 $1.2416 -0.24% + 2.42% + $1.2469 + $1.2365
USD/CAD 1.3574 1.3503 +0.53% +0.19% +1.3575 +1.3497
AUD/USD 0.6545 USD 0.6611 -1.00% -3.98% + 0.6615 USD + 0.6545 USD
EUR/CHF 0.9748 0.9706 +0.43% -1.49% +0.9751 +0.9705
EUR/GBP 0.8702 0.8676 +0.30% -1.61% +0.8705 +0.8650
NZD 0.6117 $0.6248 -2.03% -3.60% + NZD 0.6256 + $0.6117
dollars / dollars
Dollar / Norway 10.9610 10.9450 +0.05% +11.59% +11.0010 +10.9370
Euro / Norway 11.8156 11.7949 +0.18% +12.60% +11.8480 +11.7936
Dollar / Sweden 10.6820 10.6145 +0.63% +2.63% +10.7002 +10.6023
Euro / Sweden 11.5111 11.4392 +0.63% +3.19% +11.5284 +11.4354