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.
