27th July 2011
However, the Swiss franc and the yen – traditionally seen as a haven in times of market stress – both benefited.
The dollar fell to a fresh record low of SFr0.7989 against the Swiss franc and sank to Y77.54 against the yen.
Mindful Money's blogger Shaun Richards says on his blog: "The US dollar had been making a recovery from its lows in May but over the past few days it has weakened substantially again. As recently as the twelfth of this month it reached a recent peak of 76.73 on the trade weighted dollar index but yesterday it closed at a recent closing low of 73.53 for a drop of just over 4% in a little over a fortnight.
"This has made little impact in the mainstream media but we are now approaching the levels which caused a lot of debate symbolised by the use of the phrase "currency wars" by the Brazilian Finance Minister in the autumn of 2010."
Analysts said the dollar's weakness also reflected the fact that even if a deal was hammered out ahead of the deadline, it still might not satisfy the ratings agencies over the sustainability of US government finances, reports the Financial Times (paywall).
The US currency showed some signs of stability against the euro, however, climbing 0.2 per cent to $1.4486 and was 0.1 per cent stronger at $1.6405 against the pound.
Meanwhile, the pound jumped to a six week high against a weak US dollar yesterday on relief that the British economy is still growing – albeit only just, reports This is Money.
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