Reuters: US Dollar Report: FOREX-Dollar steady, focus on U.S. budget brinkmanship and Fed

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FOREX-Dollar steady, focus on U.S. budget brinkmanship and Fed Sep 27th 2013, 03:55 Thu Sep 26, 2013 11:55pm EDT * Dollar index on track to end an uninspiring week nearly flat * Fed taper uncertainty, budget cliff-hanger capping USD for now By Ian Chua and Masayuki Kitano SYDNEY/SINGAPORE, Sept 27 (Reuters) - The dollar held steady in Asia on Friday and was on track to end the week nearly flat, struggling to gain traction amid mounting U.S. political uncertainty and a lack of clarity over when the Federal Reserve will begin to scale back stimulus. The dollar index was little changed on the day at 80.544, having risen 0.3 percent on Thursday thanks in part to a report showing fewer Americans filed new claims for jobless benefits last week. But traders said the greenback was simply consolidating after a big selloff on Sept. 18, when the Federal Reserve wrong footed many investors by maintaining its bond-buying stimulus. The dollar index has recouped just about half of the 1.1 percent drop that day, when it hit a 7-month trough of 80.060. So far this week, it is up a mere 0.1 percent. Other U.S. figures out on Thursday, including a worrisome decline in consumer prices, underscored the Fed's reluctance to slow down its money-printing press. Since the surprise decision last week and following a string of speeches by Fed officials, markets are no clearer on when the Fed will eventually taper its stimulus. Three top Fed officials said on Thursday the central bank had confused markets over its policy outlook. Investors are now focused on Fed meetings in October and December, although some suspect the central bank could hold fire until early 2014 to make sure the U.S. recovery is firmly entrenched. Still, the possibility of the Fed tapering its stimulus could quickly come back on the table, said Sim Moh Siong, FX strategist for Bank of Singapore. "It's not being put off indefinitely... It's still difficult to write off the U.S. dollar despite the budget concerns," Sim said, referring to the political battle in Washington over fiscal issues. U.S. House of Representatives Republicans on Thursday refused to give in to President Barack Obama's demand for straightforward bills to run the government beyond Sept. 30 and to increase borrowing authority to avoid a default. "We argued last week that the Fed was trying very hard to be 'credibly irresponsible'. We hope that U.S. politicians won't be 'irrationally irresponsible' and will eventually reach a sensible agreement on budget and debt matters," analysts at Societe Generale wrote in a note. YEN EDGES HIGHER Against the yen, the dollar eased 0.2 percent to 98.80 yen . Earlier, the dollar slipped to 98.67 yen after Japanese Finance Minister Taro Aso said that he is not thinking of lowering the effective corporate tax rate right now. Aso's comments came in the wake of a Kyodo news agency report on Thursday that the Japanese government plans to say it will "urgently consider" cutting the corporate tax rate when it compiles a stimulus package next week. The Kyodo report had given a boost to the dollar versus the yen during Thursday's Asian trade. The issue of whether Japan will lower the effective corporate tax rate has been a recent topic for the yen, which has slid this year on the back of Japanese Prime Minister Shinzo Abe's push to reflate the economy through steps such as aggressive monetary stimulus and pro-growth structural reforms. Abe is expected to decide around Oct. 1 to proceed with a planned sales tax increase to 8 percent from 5 percent beginning next April, in a bid to rein in Japan's massive public debt. He recently instructed his cabinet to come up with measures to blunt the economic impact of the hike. The euro eased 0.1 percent to $1.3481, having backed off from Thursday's intraday high around $1.3536. Sounding a warning bell for euro bulls, European Central Bank Executive Board member Benoit Coeure said the bank has room to cut interest rates further if needed but does not target a specific level for money market rates. Link this Share this Digg this Email Reprints

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