* Euro nears 2013 peak against greenback
* Fading expectations of Fed tapering this year hurts dollar
* Tuesday's U.S. payroll data is next focus
By Gertrude Chavez-Dreyfuss and Nick Olivari
NEW YORK, Oct 18 The dollar fell to
eight-and-a-half-month lows against the euro and a currency
basket on Friday on expectations the Federal Reserve will delay
scaling back its monetary stimulus following this month's
political battles over the U.S. budget.
Volume was thin as investors braced for a deluge of U.S.
economic data next week now that the U.S. government was open
following a two-week shutdown. The September nonfarm payrolls
report is due on Tuesday.
Analysts said concerns about the negative impact of the
shutdown on the U.S. economy and the likelihood the Fed leaving
its bond-buying program intact until well into next year would
weigh on the dollar. That should give the euro the potential to
rise toward $1.40.
Joe Manimbo, senior market analyst at Western Union Business
Solutions in Washington, said the short-term budget fix forged
on the eve of the debt ceiling deadline has also "treaded on
dollar confidence as it could lead to renewed gridlock after the
The dollar index, which measures the dollar's value
against a basket of currencies, fell to 79.478, its lowest since
early February. It last traded at 79.627, flat on the day.
The index was down around 1 percent on the week and on track
for its biggest weekly decline since the week of Sept. 20, which
came after the surprise Fed decision.
The euro rose to $1.3703 against the dollar, its
highest since early February when it touched its 2013 peak of
$1.3711. It was last at $1.3684, slightly higher, and up 1
percent for the week, its best week since Sept. 20.
A little over a month ago, analysts were convinced the Fed
was ready to take its first step to rein in five years of
ultra-loose monetary policy for the world's biggest economy.
But the Fed unexpectedly left policy unchanged in September.
This was followed by a partial 16-day halt in U.S. government
spending in October, then a deal over the debt ceiling which
leaves open for further wrangling over the budget early next
Analysts at Citi said the euro could move closer to $1.40 in
the near term due to the expected delay in the reduction of the
Fed' stimulus. They expect the euro to be bought "as a safe
haven and reserve proxy for the dollar."
The deal reached on Wednesday funds the U.S. government only
until Jan. 15 and raises the borrowing limit through Feb. 7.
The first wave of U.S. data released on Thursday after the
government returned to work was fairly upbeat.
The dollar also struggled against the yen after a fall in
U.S. bond yields undermined the U.S. currency's allure. It was
slightly lower at 97.89 yen, below a three-week high of
99 reached on Thursday. The dollar has lost 0.8 percent against
the yen this week, the worst week since Sept. 27.
But one-month dollar/yen implied volatilities fell to a
nine-month low, which analysts said reflected
expectations that the dollar was likely to remain within its
recent trading range between 96.50 and 99 yen.
The Australian dollar rose to a four-month high,
helped by data showing China's annual economic growth quickened
to 7.8 percent in the third quarter. It last
traded at US$0.9666, up 0.4 percent.