(Corrects to dollar index retreated from 5-week high, not
5-month high, in second paragraph)
By Kevin Buckland
TOKYO, May 16 (Reuters) - The U.S. dollar remained under
pressure on Tuesday, weighed down by the risk of a U.S. default
as a standoff between Democrats and Republicans over raising the
debt ceiling showed few signs of being resolved.
The dollar index - which measures the currency
against a basket of six major peers - was little changed at
102.39 after sliding 0.26% overnight, retreating from a
five-week high.
The greenback had been buoyed last week by both safe-haven
demand amid a sputtering Chinese COVID recovery and by a
surprise jump in U.S. consumer inflation expectations, which led
markets to put the risk of a June Federal Reserve rate hike back
in play.
This week, though, the looming borrowing limit - which
Treasury Secretary Janet Yellen reiterated could be hit as soon
as June 1 - has forced its way to the front of investor minds.
President Joe Biden expressed confidence a deal could be
done in time ahead of an expected meeting with congressional
leaders later Tuesday. However, Republican House of
Representatives Speaker Kevin McCarthy said the two sides were
still far apart.
"U.S. dollar price action has been very messy in recent
days, reacting sharply to data," said Sean Callow, a senior FX
strategist at Westpac.
"There is also arguably some debate over what increased
stress over the debt ceiling means for USD," he added. "JPY and
CHF seem likely beneficiaries, but we have numerous historical
examples of global market trauma caused by the U.S. that
actually sees the dollar strengthen."
Westpac sees the potential for the dollar index to drop to
around 101.05 in the near term.
The euro , which has the greatest weight in the
dollar index, ticked up 0.06% on Tuesday to $1.0879, after
bouncing off a five-week low overnight.
Sterling was largely steady at $1.2529, following a
0.67% rally from Monday.
The yen, which had been hit by the wider spread between U.S.
and Japanese long-term yields, pulled itself off a nearly
two-week low.
The dollar lost 0.13% to 135.915 yen after rising
to 136.32 on Monday.
The 10-year Treasury yield eased to around 3.49%
in Tokyo from as high as 3.511% overnight.
The dollar declined 0.08% to 0.8949 Swiss franc .
The Australian and New Zealand dollars, which are not part
of the dollar index, remained bid ahead of China retail sales
data, despite recent macroeconomic readings from their key
trading partner pointing to tepid domestic demand.
The Aussie rose 0.07% to $0.67045, while New
Zealand's kiwi gained 0.16% to $0.62525.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Kevin Buckland
Editing by Shri Navaratnam)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.