Currency Note US Dollar

US government shut down undermines the US dollar

By Smart Currency October 1st, 2013

The US dollar was rocked yesterday as the possible partial government shutdown became a reality causing the currency to fall against most of its major partners. Overnight, the US government partially shut down for the first time in 17 years because a deal could not be struck on the budget, as a result, as many as 800,000 federal employees will be sent home without pay as the US edges ever closer to running out of money. A temporary budget needs to be passed to help fund the gap between now and October 17th when the debt ceiling must be raised so that the government can borrow more money, otherwise the US will run out of money and in turn will default on its debt. With the US government partially shut down, growth for the country will be damaged (some estimates suggest to the tune of $300 million a day) and in turn, means it is less likely that the Federal Reserve will commence tapering its quantitative easing program this month. Encouraging data in the form of better than expected Chicago purchasing managers index helped to give the dollar a little bit of buoyancy in the day, but was overshadowed by the bigger events. Today, manufacturing PMI figures is the most influential economic indicator due for release, while positive results from other smaller areas could join together to give a little more strength to the currency. Call in now to see how the US dollar continues to react following last night’s revelations.