Investing.com - The dollar weakened against most major currencies on Thursday after investors looked beyond a fiscal impasse in the U.S. and more towards its effects on the economy, fearing the deadlock may prompt the Federal Reserve to keep monetary stimulus programs in place.
In U.S. trading on Thursday, EUR/USD was up 1.03% at 1.3674.
The U.S. Congress passed a bill to reopen the government and raise the debt ceiling on Wednesday, just hours ahead of a deadline that would have opened the doors to possible sovereign debt defaults.
The deal will fund the government until Jan. 15 and raise the government borrowing limit until Feb. 7.
Both Republicans and Democrats also agreed to talks over broad budget issues in an attempt to reach a longer-term deal by Dec. 13.
Still, the dollar weakened amid concerns that the 16-day shutdown and accompanying default fears took their toll on an already fragile economic recovery, which could prompt the Federal Reserve to delay plans for wind down its stimulus program until early 2014.
Prior to the shutdown, many were expecting the Fed to move in December.
The Fed is currently buying USD85 billion in Treasury holdings and mortgage debt a month to boost the economy, a monetary policy tool known as quantitative easing that drives down interest rates to spur recovery, weakening the dollar in the process.
On Wednesday, the Federal Reserve released its Beige Book, which analyzes current economic conditions, and the document revealed that the U.S. central bank was concerned about the effects fiscal drags may have on recovery.
"Contacts across Districts generally remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate," the Beige Book read.
Lackluster economic indicators softened the dollar as well, as Federal Reserve officials have repeated that they'll pay close attention to data when deciding on the fate of monetary stimulus measures.
The U.S. Department of Labor said Thursday the number of individuals filing for initial jobless benefits last week declined by 15,000 to a seasonally adjusted 358,000 from a downwardly revised 373,000 in the preceding week.
Analysts had expected U.S. jobless claims to decline to 335,000 last week.
Separately, data revealed that the Philly Fed manufacturing index ticked down to 19.8 from 22.3 in September, but came in above expectations for a reading of 15.0.
The greenback was down against the pound, with GBP/USD up 1.33% at 1.6160.
Across the Atlantic, the pound saw support after data released on Thursday showed that U.K. retail sales rose at a faster than expected rate in September.
The Office for National Statistics said U.K. retail sales rose 0.6% in September from a month earlier, compared to expectations for a 0.4% increase and were 2.2% higher on a year-over-year basis.
The dollar was down against the yen, with USD/JPY down 0.87% at 97.90, and down against the Swiss franc, with USD/CHF down 1.24% at 0.9020.
The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.33% at 1.0293, AUD/USD up 0.78% at 0.9626 and NZD/USD trading up 0.83% at 0.8485.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 1.06% at 79.73.
In U.S. trading on Thursday, EUR/USD was up 1.03% at 1.3674.
The U.S. Congress passed a bill to reopen the government and raise the debt ceiling on Wednesday, just hours ahead of a deadline that would have opened the doors to possible sovereign debt defaults.
The deal will fund the government until Jan. 15 and raise the government borrowing limit until Feb. 7.
Both Republicans and Democrats also agreed to talks over broad budget issues in an attempt to reach a longer-term deal by Dec. 13.
Still, the dollar weakened amid concerns that the 16-day shutdown and accompanying default fears took their toll on an already fragile economic recovery, which could prompt the Federal Reserve to delay plans for wind down its stimulus program until early 2014.
Prior to the shutdown, many were expecting the Fed to move in December.
The Fed is currently buying USD85 billion in Treasury holdings and mortgage debt a month to boost the economy, a monetary policy tool known as quantitative easing that drives down interest rates to spur recovery, weakening the dollar in the process.
On Wednesday, the Federal Reserve released its Beige Book, which analyzes current economic conditions, and the document revealed that the U.S. central bank was concerned about the effects fiscal drags may have on recovery.
"Contacts across Districts generally remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate," the Beige Book read.
Lackluster economic indicators softened the dollar as well, as Federal Reserve officials have repeated that they'll pay close attention to data when deciding on the fate of monetary stimulus measures.
The U.S. Department of Labor said Thursday the number of individuals filing for initial jobless benefits last week declined by 15,000 to a seasonally adjusted 358,000 from a downwardly revised 373,000 in the preceding week.
Analysts had expected U.S. jobless claims to decline to 335,000 last week.
Separately, data revealed that the Philly Fed manufacturing index ticked down to 19.8 from 22.3 in September, but came in above expectations for a reading of 15.0.
The greenback was down against the pound, with GBP/USD up 1.33% at 1.6160.
Across the Atlantic, the pound saw support after data released on Thursday showed that U.K. retail sales rose at a faster than expected rate in September.
The Office for National Statistics said U.K. retail sales rose 0.6% in September from a month earlier, compared to expectations for a 0.4% increase and were 2.2% higher on a year-over-year basis.
The dollar was down against the yen, with USD/JPY down 0.87% at 97.90, and down against the Swiss franc, with USD/CHF down 1.24% at 0.9020.
The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.33% at 1.0293, AUD/USD up 0.78% at 0.9626 and NZD/USD trading up 0.83% at 0.8485.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 1.06% at 79.73.