Friday, October 4, 2013

Shutdown Weakens U.S. Dollar

Shutdown Weakens U.S. Dollar 

The article expounds upon the U.S Government shutdown and its profound economic implications on the U.S Dollar value and borrowing rates, which had been beyond control in terms of the federal-debt ceiling limit, which in itself didn’t bring about an agreement from either Republicans and Democrats. The authors are Ms. Chiara Albanese and Ira Iosebashhvili, whom had highlighted the Dollar’s sharp drops since seven months starting from Tuesday Midnight against the Euro and U.K’s Pound. They revealed the economic advantage taken by Investors, who are selling and rebuying their dollars at the midst of the shutdown. That has got worsen for the Federal Reserve, as they have raised their traditional bond-buying program in hopes to continue the stimulation of the economy. Investors have voiced fierce strong over the direct economic ramifications, including the layoffs of more than 800,000 government employees in wide federal bureaucracies and agencies.

Historically and by average, Investors tend to strengthen their dollar positions ahead through the selling-rebuying method and especially before government shutdowns or debt-ceiling deadlines. An illustrated example was dated back during the 1970s where investors would sell their dollars 10 days before a government shutdown or debt ceiling deadlines occurs and buy it later after 10 days in the midst of a shutdown or a debt ceiling deadline. Although, most investors expects the dollar to rise gradually once congress agrees on a debt-ceiling limit. For many analysts, spectators, speculators, and investors, the shutdown and debt-ceiling scenario is going to be unfolded as the Euro and Pound outlook is at moderate rates, which could further underestimate the Dollar value and its outlook. 

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