With another weekend now concluded and still no compromise between the U.S. Democrats and Republicans towards the end of the political stalemate, the U.S. Dollar slipped again in Asian trading while the safe haven Japanese Yen gained. Investors’ fears that the U.S. debt will be defaulted on in only a few days time is growing. Though weekend talks were labeled “substantive” by the political parties, giving rise to some hope that a deal might soon be brokered, as the deadline of October 17th edges ever closer, the absence of a firm commitment is worrying.
The USD/JPY pair traded at 98.29 Yen, slipping back 0.3%, moving away from Friday’s high of 98.60 Yen. The Japanese Yen gained broadly against higher yielding currencies like the Australian Dollar which also lost about 0.3% of its value against the safe haven. Market players are wary of making heavy bets on the Yen, however, just in case a deal comes through in the 11th hour. The greenback also lost ground against the common currency Euro and the safe haven Swiss Franc with the EUR/USD pair trading at $1.3563, a gain of 0.1% and the USD/CHF trading at 0.9096, a loss of 0.3%.
Dollar Default Could Impact on Global Economies
If the politicians can’t find common ground to end the showdown by Thursday, which is the date that the debt ceiling must be raised, the U.S. will be unable to meet its financial obligations which are coming due, the repercussions of which will be felt far and wide in the financial markets.