News Column

U.S. Dollar Hammered in Debt Crisis Backlash

October 18, 2013

Hugo Duncan, Daily Mail

u.s. currency

Oct. 18--The US dollar was hammered yesterday as Barack Obama said the country's debt crisis had 'inflicted completely unnecessary damage' on the economy and America's standing in the world.

Relief that Congress secured a last-gasp deal to raise the $16.7trillion (pounds sterling 10.5trillion) debt ceiling and prevent a catastrophic default quickly turned to anger in Washington and beyond.

The dollar tumbled against the world's major currencies -- the pound jumped as much as 1.41pc to $1.6172 -- amid warnings that the short-term fix merely paved the way for another showdown in the coming months.

Analysts said the row could force the Federal Reserve to delay plans to reduce its $85bn per month programme of quantitative easing, further weakening the greenback.

Outgoing Fed chairman Ben Bernanke had planned to start so-called 'tapering' before the end of this year but it is now feared that would be premature, given the drag on growth created by Washington.

It may now fall to Bernanke's successor, Janet Yellen, to start winding down Fed support after she takes over in January.

Simon Derrick, head of currency strategy at BNY Mellon in London, said: 'What this does is push back expectations of Fed tapering to early 2014.' The deal, which also reopened the state after a 16-day partial shutdown in which all but the most essential services were closed, funds the government to January 15 and extends the borrowing limit to February 7.

Richard Fisher, president of the Dallas Fed, said the White House and Congress must 'get their act together'. He added: 'Kicking the can down the road for a few months will not solve the pathology of fiscal misfeasance that undermines our economy and threatens our future.'

President Obama said: 'We've got to get out of the habit of governing by crisis. The American people are completely fed up with Washington. How business is done in this town has to change.'

Ratings agency Standard & Poor's said the crisis has cost the US economy $24bn and knocked 0.6 pc off annual growth in the final quarter of the year.

Tom Becket, chief investment officer at PSigma Investment Management in London, lambasted a 'calamitous own goal from the US politicians'. He warned: 'We are going to have to get used to this form of dysfunctional dialect of politics in the US. This latest agreement is only another shoddy sticking plaster.'

Philip Marey, a strategist at Rabobank, said: 'It casts dark clouds over the economy. Politics are now the main drag for growth in the US.'


(c)2013 Daily Mail (London)

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Distributed by MCT Information Services

Original headline: Obama: Crisis has damaged America

Source: (c)2013 Daily Mail (London)

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