Dollar falls on government shutdown worries

CHICAGO (Oct 2)   The U.S. dollar fell on Wednesday as investors worried about the length of the government shutdown and the upcoming debt-ceiling battle.

The greenback came under more pressure after the private sector added fewer-than-expected jobs in September. Employers created 166,000 jobs last month, according to Automatic Data Processing Inc.

The ICE dollar index, a measure of the greenback’s strength against six rivals, fell to 79.882 from 80.116 late Tuesday. Tuesday’s close was the lowest in more than seven months.

The WSJ Dollar Index, which compares the dollar to a broader basket of rivals, declined to 72.36 from 72.52.

“The hope that this was bluster is beginning to recede into fear about how long the U.S. political deadlock can last – with the next day of consequence being [Oct.] 17 – when the U.S. runs out of cash and the debt ceiling becomes a default,” said Robert Savage, chief strategist at FX Concepts, in a note.

An extended government shutdown would prevent the release of the employment report for September on Friday, which is used by the Federal Reserve in deciding when to slow the pace of its monthly bond purchases. Many economists expect the Fed to hold monetary policy steady at its October meeting because of the shutdown.

The British pound  GBPUSD +0.19%  rose to $1.6244 from $1.6205 late Tuesday, while the euro /quotes/zigman/4867933/sampled EURUSD +0.46%  rose to $1.3584 from $1.3531.

The European Central Bank on Wednesday made no change to monetary policy, as expected, holding its key lending rate at 0.5%. In a press conference, ECB President Mario Draghi said the euro’s exchange rate isn’t a policy target, but is important for growth.

In other currency action, the dollar USDJPY -0.76%  fell to 97.37 Japanese yen from ¥97.82 late Tuesday. The Australian dollar AUDUSD-0.34%  declined to 93.45 U.S. cents from 93.96 U.S. cents.