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Dollar Sinking On Concerns Over Possible Government Shutdown

EURUSD1 092713

The dollar is losing ground against all of its major competitors at the end of the trading week, as concerns over a possible government shutdown continue to weigh on investors. Lawmakers continue to wrangle over legislation to keep the government running past next Monday.

The Senate is scheduled to vote on a temporary spending bill, stripping out language from a House-passed bill that defunds Obamacare. The legislation is expected to pass the Senate, and then the House Republican leadership would have to decide whether to bring the Senate bill up for a vote or risk a government shutdown.

U.S. House Speaker John Boehner previewed upcoming House legislation at a press conference on Thursday that he said would tie an increase in the debt limit to spending cuts and pro-growth reforms. Noting that President Barack Obama has repeatedly refused to negotiate over raising the debt limit, Boehner said, "Well, I'm sorry, but it just doesn't work that way."

Personal income and spending in the U.S. both rose in line with economist estimates in the month of August, according to a report released by the Commerce Department on Friday.

The report said personal income rose by 0.4 percent in August following an upwardly revised 0.2 percent increase in July. The acceleration in the pace of growth matched expectations.

Additionally, the report said personal spending increased by 0.3 percent in August after rising by an upwardly revised 0.2 percent in the previous month. The spending growth came in line with estimates.

Thomson Reuters and the University of Michigan released a report on Friday showing an upward revision to their reading on U.S. consumer sentiment in the month of September, although the index still pointed to deterioration in sentiment compared the previous month.

The report showed that the final reading on the consumer sentiment index for September came in at 77.5, above the preliminary reading of 76.8 but still below the final August reading of 82.1.

The dollar rose to an early high of $1.3474 against the Euro on Friday, but has since dropped to a 4-session low of $1.3540.

Eurozone economic confidence rose more than expected to a 25-month high in September, with marked strength across all business sectors, averting fears of a near-term relapse in activity. The economic confidence index rose for the fifth month in a row to 96.9 in September, the highest level since August 2011, from a revised 95.3 in August, the European Commission said Friday. The reading was also above the consensus estimate of 96.

The French economy exited recession as initially estimated in the second quarter, final data from the statistical office Insee revealed Friday. Gross domestic product gained 0.5 percent from a quarter ago. This was the fastest growth rate recorded since the first quarter of 2011, Insee said.

Bank of England Governor Mark Carney said that he sees no case for more quantitative easing as the economic recovery has gained momentum. In an interview to the Yorkshire Post, Carney said that the Bank of England would consider the case for more quantitative easing should the recovery falter.

"But my personal view is, given the recovery has strengthened and broadened, I don't see a case for quantitative easing and I have not supported it," the newspaper quoted him as saying.

The greenback has retreated from yesterday's high of $1.5998 against the pound sterling, to over a 1-week low of $1.6137 on Friday.

British consumer sentiment reached its highest level in nearly six years in September as households turned more confident about the economy achieving sustainable growth, a survey by market research group GfK showed Friday. The headline consumer confidence index rose to -10 in September, the highest reading since November 2007, from -13 in August. The index topped the -11 reading forecast by economists.

An indicator of British service sector output increased in July, data from the Office for National Statistics showed Friday. The index of services increased 0.2 percent month-on-month in July. This, however, was weaker than the expected 0.5 percent rise. The indicator was flat between May and June.

The buck reached a high of Y99126 against the Japanese Yen on Thursday, but has fallen to over a 1-week low of Y98.181 on Friday.

Core consumer prices in Japan gained 0.8 percent on year in August, the Ministry of Internal Affairs and Communications said on Friday - suggesting a possible end to the deflationary problems that have plagued the nation for more than a decade. The headline figure beat forecasts for a gain of 0.7 percent, which would have been unchanged from the July reading.

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