The dollar came close to an 8-month low on Wednesday as the government shutdown continued, bringing the United States government closer to the mid-October deadline that may see a historic debt default. The panic spread beyond US borders into both Europe and Asia, where shares continued to plummet.
Though it seems unlikely that the debt default will actually happen, Europe’s already delicate economic state and the improvements that it has made in recent years could be thrown into turmoil, because the partnership between Europe and the United States is among the strongest economic dependencies in the world. Despite this, even if the US does not default on its loans, the weakening US dollar is likely to have some tangible impact on Europe, as demands for exports will likely be decreased.
What’s Going on in Asia?
Britain’s .FTSE, which already hit a three-month low this week, slipped 0.3 percent on Tuesday. Germany’s DAX slipped 0.3 percent as well. In contrast, Japan’s .N225 index finally overcame its recent five-week lows. The Japanese yen fell on Tuesday against its 16 major counterparts following the announcement that Janet Yellen will become the first female head of the Federal Reserve.
Specifically, the yen fell 0.5 percent to 132.14 against the euro in Wednesday’s early Asian session, and it traded at 97.41 per US dollar. Yellen is expected to take on her new position at the start of 2014, and her appointment injected a bit of positive risk sentiment into the markets , despite the fact that her outlook is very similar to current Reserve Chairman Ben Bernanke’s.