The Australian dollar held it’s biggest one-day drop against the yen in a week as U.S. lawmakers remained at impasse on how to end a government shutdown and raise the debt limit, damping demand for higher-yielding assets.
U.S. President Barack Obama reiterated he won’t negotiate with Republicans over the debt ceiling, adding to concern of a default by the world’s biggest economy. New Zealand’s currency fell versus all of its major counterparts after equities worldwide declined.
“The Aussie is still susceptible to a fall if markets get a little worried about both the debt ceiling and the U.S. economic outlook,” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia (CBA), the nation’s biggest lender. “The longer the political deadlock goes on and the closer we get to those deadlines, the more destabilizing it could be.”
The Australian dollar was at 91.26 yen as of 11:08 a.m. in Sydney from 91.18 yesterday when it slid 0.9 percent, the most since Sept. 27. The Aussie rose 0.1 percent to 94.35 U.S. cents. New Zealand’s kiwi dollar was little changed at 83.01 U.S. cents. It traded at 80.34 yen, little changed from yesterday when it declined 1 percent.
Australia’s 10-year bond was at 4.06 percent, while the three-year yield traded at 3.01 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was at 3.48 percent, set for the highest close since Sept. 20.
The Standard & Poor’s 500 Index (SPX) of U.S. shares lost 0.9 percent yesterday, while the Stoxx Europe 600 Index slid 0.2 percent.
Many U.S. government services have been shuttered for a week and the country is nine days away from exhausting its borrowing authority.
Senate Democrats are considering a strategy that would allow Obama to raise the debt ceiling without requiring any Republican to vote in favor of a debt-limit increase, said Senator Richard Durbin of Illinois, the second-ranking Democrat. A test vote on the proposal could occur as soon as Oct. 11 as the debates over the government shutdown and the debt limit have merged.
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