US Dollar Continues to Slide...
Monday, 25 July 2011

ImageThe dollar hit a record low versus the Swiss franc and a four-month trough against the yen on Monday as the impasse over raising the U.S. debt ceiling unsettled financial markets and fueled demand for perceived safe-haven currencies.

The Swiss franc was the biggest beneficiary of the demand for safe havens, pushing the dollar nearly 2 percent lower to an all-time low of 0.8021 franc on trading platform EBS. The euro fell the same amount versus the Swiss currency.

Most investors expect a deal will be done before the August 2 deadline to avert default, but the lack of progress in talks over how to cut the budget deficit and the possibility of a ratings downgrade Of U.S. debt weighed on risk sentiment, which analysts said would keep dogging the dollar.

The U.S. Treasury says it will run out of money to pay the country's bills after August 2, though some analysts say the Treasury may be able to scrape some money together to get by for a week or two -- a scenario that some market players are starting to think cannot be ruled out.

Many traders think the dollar could test a record low of 76.25 yen if concerns about the U.S. debt ceiling worsen, while they also expect the U.S. currency will keep plumbing all-time troughs versus the Swiss franc.

"It's likely the U.S. will stitch up some sort of deal to avoid a technical default next week, but it could drag on until the last moment," said Adam Cole, global head of FX at RBC.

"If it does drag on, the only clear cut conclusion you can draw is that dollar/yen goes down, and dollar/Swiss goes down, and we're seeing a miniature version of that today."


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