January 18, 2018 / 4:18 PM / a month ago

FOREX-Dollar falls on worries over possible U.S. government shutdown

    * Bit to keep US govt open stokes anti-dollar mood
    * Euro hold below 3-year peak versus greenback
    * Evidence of reserve diversification drags on dollar

 (Updates market action, changes dateline, previous LONDON)
    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 amid 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
said.
    "Politics are sabotaging economics," said Boris Schlossberg,
managing director of FX strategy at BK Asset Management in New
York. "It's the uncertainty about the U.S. budget deal. We are
going to see further pressure on the dollar if there isn't a
deal."
    Republican lawmakers 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 10:53 a.m. (1553 GMT), the dollar index was down 0.36
percent at 90.590. 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 0.43 percent at $1.2236.
    The dollar was down 0.22 percent at 111.03 yen, while the
pound was up 0.35 percent at $1.3874.
    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.

     
    RESERVE DIVERSIFICATION
    The dollar has fallen since 2017 largely on expectations
central banks besides the Federal Reserve are seeking to end the
extraordinary measures they adopted to combat the 2008 global
financial crisis and the recession that follwed.
    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 two largest foreign U.S. creditors, cut
their Treasuries holdings in November.
    An analysis of the quarterly data published by the
International Monetary Fund of the currency composition of the
world’s foreign exchange reserves held by global central banks
showed that reserve managers were increasing the pace of adding
non-dollar based currencies to their reserves.
    BNY Mellon strategists said the increase in holdings of
pounds and euros in global central banks' reserves over the
three quarters ending September 2017 came at the expense of
reduced allocation into U.S. dollars.
========================================================
    Currency bid prices at 10:51AM (1551 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.2236        $1.2184     +0.43%         +2.00%      +1.2265     +1.2166
 Dollar/Yen       JPY=        110.9900       111.2800    -0.26%         -1.49%      +111.4800   +110.8300
 Euro/Yen         EURJPY=     135.85         135.60      +0.18%         +0.50%      +136.3000   +135.4800
 Dollar/Swiss     CHF=        0.9597         0.9654      -0.59%         -1.50%      +0.9666     +0.9579
 Sterling/Dollar  GBP=        1.3875         1.3825      +0.36%         +2.69%      +1.3890     +1.3806
 Dollar/Canadian  CAD=        1.2481         1.2434      +0.38%         -0.76%      +1.2484     +1.2428
 Australian/Doll  AUD=        0.7986         0.7969      +0.21%         +2.37%      +0.8005     +0.7942
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1745         1.1765      -0.17%         +0.48%      +1.1775     +1.1734
 Euro/Sterling    EURGBP=     0.8818         0.8810      +0.09%         -0.73%      +0.8837     +0.8809
 NZ               NZD=        0.7301         0.7271      +0.41%         +3.03%      +0.7320     +0.7247
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        7.8287         7.8766      -0.61%         -4.61%      +7.8932     +7.8218
 Euro/Norway      EURNOK=     9.5823         9.6033      -0.22%         -2.70%      +9.6209     +9.5805
 Dollar/Sweden    SEK=        8.0245         8.0482      +0.10%         -2.16%      +8.0619     +8.0143
 Euro/Sweden      EURSEK=     9.8204         9.8104      +0.10%         -0.19%      +9.8394     +9.8068
 
    
 (Additional reporting by Saikat Chatterjee in London; Editing
by Bernadette Baum)
  
 
 
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