Dollar weakens vs. euro as debt deadline looms

Rate Bets

“New Zealand is almost the only developed country with a rate increase coming into sight, so the kiwi is likely to remain strong,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. Markets are expecting the central bank to raise interest rates “because of the resilient economy and inflation concerns.”

The kiwi climbed 0.5% to 84.19 U.S. cents and touched 84.31 cents, the highest level since Sept. 19.

South Korea’s won advanced amid demand for higher-yielding assets and as a government report showed the nation’s adjusted jobless rate declined to 3% in September, the lowest level since December 2012. The currency advanced 0.1% to close at 1,065.69 per dollar in Seoul after reaching 1,065.44, the strongest since Jan. 23.

The dollar declined 0.9% in the past month, according to Bloomberg Correlation Weighted Indexes, which track 10 developed-nation currencies. The euro gained 0.9%, while the yen fell 0.3%.

Dollar Outlook

Congress’s failure to reach an agreement would probably see the dollar weaken “pretty quickly” toward the 96 yen level, said Jim Vrondas, chief currency and payment strategist at OzForex Ltd. in Sydney. The dollar was last lower than 96 yen on Aug. 12.

While the emerging Senate accord may be announced as early as today, passage in the Republican-led House is far from assured. Fitch Ratings put the U.S.’s AAA credit rating on a negative watch yesterday, citing the government’s failure to raise its borrowing limit as the deadline approaches.

JPMorgan Chase & Co.’s G-7 Volatility Index, a measure of price swings among Group of Seven nations’ currencies, dropped to 8.17% yesterday, the lowest level since Jan. 23. It rose today to 8.25%. The 2013 average is 9.46%.

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