US dollar holds steady as United States government shutdown starts

A clerk holds US 100-dollar notes at a money changer shop in Jakarta on August 22, 2013. The United States dollar held steady on Tuesday even though much of the US government was due to start shutting down after Congress failed to find a compromise o
A clerk holds US 100-dollar notes at a money changer shop in Jakarta on August 22, 2013. The United States dollar held steady on Tuesday even though much of the US government was due to start shutting down after Congress failed to find a compromise on a bill to fund government operations. -- FILE PHOTO: AFP

REUTERS - The United States dollar held steady on Tuesday even though much of the US government was due to start shutting down after Congress failed to find a compromise on a bill to fund government operations.

Competing spending measures flew back and forth between Republican-controlled House of Representatives and Democratic-led Senate late into Monday night in Washington but Congress deadlocked over Republican efforts to use the temporary spending bill as a way to delay implementation of President Barack Obama's health care programme.

It comes a few weeks ahead of the next political battle to raise the federal government's debt ceiling. Failure to do the latter by mid-October could result in a historic US debt default that would threaten the US economy and send ripples around the globe.

S&P stock futures inched up 0.2 per cent, unchanged from earlier price action after the cash index fell 0.6 per cent on Monday, while US Treasury futures slipped 5 ticks.

As many as one million US federal employees could face unpaid furloughs, but a shutdown would be unlikely to affect the United States's sovereign credit rating.

Investors are accustomed to political battles in Washington resulting in a last-minute accord and voiced scepticism any shutdown would last for an extended period.

"It may have a knock-on effect on the timing of the potential tapering (by the Federal Reserve). It could have a knock-on effect on the production of economic data. It could have a real impact on consumption if it lasts for more than a day," said a senior trader at a foreign bank in Tokyo. "People in the market are kind of interpreting this as a kabuki drama if you like, but we are little more concerned than that."

The dollar was down 0.1 per cent against a basket of currencies. It was steady at 98.15 yen, having climbed off a one-month low of 97.50 on Monday as Japan's Prime Minister Shinzo Abe was expected to announce his economic growth and tax strategy later on Tuesday.

MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2 per cent, though it was still not too far away from a two-week low after it slid 1.5 per cent in the previous session. Regional trading activity was expected to be light with China and Hong Kong closed for National Day holiday.