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Dollar drops as focus returns to Fed policy

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Investing.com - " The dollar was lower against the other major currencies on Thursday as expectations that the economic impact of the U.S. debt crisis would see the Federal Reserve continue its stimulus program weighed.

During U.S. morning trade, the dollar was sharply lower against the yen, with USD/JPY dropping 0.92% to 97.85.

The dollar initially hit three-week highs against the yen after the U.S. Congress passed a bill to reopen the government and raise the debt ceiling, just hours ahead of a deadline to avert a debt sovereign debt default.

The deal will fund the government until January 15 and raise the government borrowing limit until February 7. Both sides also agreed to talks over broad budget issues in an attempt to reach a longer-term deal by December 13.

But the dollar came under heavy selling pressure amid fears that the impact of the government shutdown on the already fragile economic recovery would prompt the Fed to the delay plans for scaling back its stimulus program until at least the start of next year.

The possibility of another debt crisis also loomed, as the temporary solution does not resolve the underlying budgetary issues dividing Republicans and Democrats.

The euro rose to eight-month highs against the dollar, with EUR/USD advancing 0.92% to 1.3659.

Elsewhere, the pound rallied against the dollar, with GBP/USD jumping 1.27% to 1.6150.

Sterling extended gains after data released on Thursday showed that retail sales in the U.K. 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 posted steep losses against the Swiss franc, with USD/CHF tumbling 1.14% to 0.9029.

The greenback fell to multi-month lows against the Australian and New Zealand dollars, with AUD/USD up 0.87% to four month highs of 0.9635, NZD/USD advancing 0.99% to six-month peaks of 0.8507.

The greenback was also lower against the Canadian dollar, with USD/CAD losing 0.36% to trade at 1.0289.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, dropped 1.01% to four month lows of 79.77.

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.

A separate report showed 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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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