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Dollar falls below ¥97 on U.S. fracas

JIJI

The dollar dropped below ¥97 in Tokyo trading late Monday due to uncertainties over the ongoing U.S. budget impasse.

At 5 p.m., the dollar stood at ¥96.91-92, down from ¥97.08-09 at the same time Friday. The euro was at $1.3579-3580, down from $1.3618-3619, and at $131.60-62, down from ¥132.22-22.

The dollar was weak around ¥97.30 in early Tokyo trading. It had risen overseas late last week to around ¥97.50 on buybacks thanks to hopes for progress in U.S. congressional talks on breaking the impasse.

The dollar was stuck in a narrow range below ¥97.50 in midmorning trading due to the absence of fresh trading incentives as Australian and Chinese financial markets were closed Monday for national holidays.

The dollar came under selling pressure after Tokyo stocks extended losses, but it resisted a further drop, apparently helped by buying on dips, sources said.

After European investors joined trading in late hours, the dollar slipped below ¥97 on renewed concerns over the U.S. budget deadlock, the sources said.

Because the U.S. Congress made no progress during the weekend in talks to break the deadlock over the fiscal 2014 budget, the dollar remained on a weak note, the sources said.

The dollar was also pressured by the looming Oct. 17 deadline for raising the U.S. government’s debt ceiling.

“With the approach of the deadline, investor caution grows further,” an official at a foreign exchange brokerage house said, adding that position-adjustment moves on the dollar will spread.

Judging from the stance of Republicans, the budget stalemate is unlikely to be resolved by the end of this week, a major U.S. bank official said.

Still, most market participants believe that Democrats and Republicans will move to avoid a U.S. government default.

Until investors see signs of a solution to the U.S. fiscal deadlock, they will find it difficult to tilt their investment positions either way, an official at a foreign exchange margin trading service firm said.

“If U.S. stocks tumble during the budget impasse, the dollar may face massive selling and fall below ¥96,” an official at a major domestic bank said.