January 18, 2018 / 8:03 PM / in a year

FOREX-Dollar slips on jitters over possible U.S. government shutdown

    * Turmoil to keep US govt open stokes anti-dollar mood
    * Euro holds below 3-year peak versus greenback
    * Evidence of reserve diversification drags on dollar
    * Bitcoin stabilizes after brutal two-day selloff

 (Updates market action, adds quotes)
    By Richard Leong
    NEW YORK, Jan 18 (Reuters) - The U.S. dollar fell on
Thursday as traders piled into the euro, yen, sterling and other
major currencies, prompted by concerns over a possible U.S.
government shutdown as lawmakers struggled to cobble together a
federal budget deal.
    If an agreement to fund government operations, even a
temporary one, is not reached by the Friday deadline, it would
compound an already negative climate for the greenback, analysts
    "Politics are sabotaging economics," said Boris Schlossberg,
managing director of FX strategy at BK Asset Management in New
York. "We are going to see further pressure on the dollar if
there isn't a deal."
    Republican lawmakers, amid mixed signals from President
Donald Trump, are scrambling to pass a temporary measure to keep
the government open. A House vote on the funding extension is
expected after 2:30 p.m. (1930 GMT).
    At 2:44 p.m. (1944 GMT), the trade-weighted dollar index
 was down 0.44 percent at 90.513. It held above a
three-year low of 90.104 touched on Wednesday.
    The euro hovered below its three-year peak against the
greenback. It was up 0.48 percent at $1.2242.
    The dollar was down 0.23 percent at 111.02 yen, while the
pound was up 0.45 percent at $1.3888.
    The greenback reversed gains from late Wednesday after Apple
Inc. said it would make about $38 billion in one-time
tax payments on its overseas cash holdings, though analysts
expect the impact on currency markets is going to be limited.

    Meanwhile, bitcoin and other cryptocurrencies
staged a modest rebound following two days of heavy losses tied
to fears about regulatory clamp-down around the world.
    The world's biggest digital currency was last up 5.12
percent at $11,764.00 on the Luxembourg-based Bitstamp exchange.
    The dollar has fallen since 2017 largely on expectations
central banks besides the Federal Reserve are seeking to end
their policy of ultra low, even negative, rates that they
adopted to combat the 2008 global financial crisis and the
recession that followed.
    Another factor analysts are attributing to the greenback's
weakness is that global investors, including sovereign wealth
funds and central banks, are looking to diversify their dollar
holdings into other currencies. 
    China and Japan, the top two foreign U.S. creditors, cut
their Treasuries holdings in November according to Treasury
Department data.
    According to a report from the International Monetary Fund
released in December, central banks picked up their pace of
adding non-dollar based currencies to their foreign exchange
reserves in the third quarter.
    "If you believe yields outside the U.S. are heading higher
this year and next year, it is more palatable for central banks
to move into euro and other currencies away from the dollar,"
said Paresh Upadhyaya, director of currency strategy at Amundi
Pioneer Investments in Boston.
    Currency bid prices at 2:44PM (1944 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2242        $1.2184     +0.48%         +2.05%      +1.2265     +1.2166
 Dollar/Yen       JPY=        111.0300       111.2800    -0.22%         -1.46%      +111.4800   +110.7000
 Euro/Yen         EURJPY=     135.93         135.60      +0.24%         +0.55%      +136.3000   +135.4800
 Dollar/Swiss     CHF=        0.9583         0.9654      -0.74%         -1.64%      +0.9666     +0.9576
 Sterling/Dollar  GBP=        1.3889         1.3825      +0.46%         +2.79%      +1.3912     +1.3806
 Dollar/Canadian  CAD=        1.2436         1.2434      +0.02%         -1.12%      +1.2486     +1.2415
 Australian/Doll  AUD=        0.7994         0.7969      +0.31%         +2.47%      +0.8006     +0.7942
 Euro/Swiss       EURCHF=     1.1732         1.1765      -0.28%         +0.37%      +1.1775     +1.1730
 Euro/Sterling    EURGBP=     0.8812         0.8810      +0.02%         -0.80%      +0.8837     +0.8802
 NZ               NZD=        0.7306         0.7271      +0.48%         +3.10%      +0.7320     +0.7247
 Dollar/Norway    NOK=        7.8379         7.8766      -0.49%         -4.50%      +7.8932     +7.8182
 Euro/Norway      EURNOK=     9.5963         9.6033      -0.07%         -2.56%      +9.6209     +9.5735
 Dollar/Sweden    SEK=        8.0147         8.0482      +0.01%         -2.28%      +8.0619     +8.0085
 Euro/Sweden      EURSEK=     9.8110         9.8104      +0.01%         -0.29%      +9.8394     +9.8066

 (Additional reporting by Saikat Chatterjee in London; Editing
by Bernadette Baum and Chizu Nomiyama)
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