A day after agreement was reached on the U.S. debt ceiling, the U.S. dollar reached a new low against the Swiss franc, following concerns that the deal is insufficient to prevent a U.S. credit rating downgrade.
The deal to cut $2.4 trillion from the nation’s budgets over 10 years was far short of the $4 trillion that Standard and Poor indicated was needed to stave off a downgrade.
In addition, the fact that no new tax revenues were immediately included did not help the fate of the dollar.
PIMCO’s Bill Gross yesterday described America as a “debt man walking“, referring both to the government’s dysfunction and $60 trillion of present and future unfunded liabilities.
The U.S. dollar fell 0.5% versus the Swiss franc to 0.78153 francs, well below last week’s record low just above 0.7850 francs.
Forex traders said selling by real money accounts, pushed the dollar well off the day’s high around 0.7954 francs, plus selling by a U.S. investment bank.
The dollar traded 0.2% higher at 76.88 yen, well below an earlier high of 78.05 yen and positioned itself to test its all-time low of 76.25 yen.
The Euro is having its own problems based on the Eurozone credit crisis and also weakened against the Swiss franc.
Switzerland has become a safe haven as it consistently runs large current-account surpluses. This year, its surplus will exceed 13% of GDP and the IMF forecasts that it will remain in double digits over the coming five years, regardless of the strength of the Swiss franc.