The Australian dollar is higher against a weaker US dollar as the US Congress struggles to pass budget legislation before the end of the financial year.
At 0700 AEST on Tuesday, the local unit was trading at 93.21 US cents, up from 93.08 cents on Monday.
If the Congress fails to pass legislation before the US financial year ends at midnight (1400 AEST), most parts of the government will have to close because they won’t have the money to pay staff.
Less than 10 hours before the deadline, the Democratic-led Senate rejected conditions that House Republicans attached to a temporary spending bill.
The Senate voted 54-46 on Monday to strip a one-year delay in President Barack Obama’s healthcare law from the bill that would keep the government operating.
OM Financial senior client adviser Stuart Ive said the US dollar fell against most of the major currencies in overnight trade because of the impasse in Washington.
“The Aussie dollar managed to stay pretty strong against the US dollar,” he said from Wellington.
“We’re going to be very sensitive to any news about a partial closure of the government or if some emergency legislation gets passed.”
Ive said a partial shutdown of the US government could detract as much as 0.1 percentage points from December quarter economic growth.
“It becomes a growth story and that’s why there’s weakness coming into the US dollar,” he said.
A US government shutdown will also mean there won’t be any economic data released from government departments because there won’t be the staff on duty to finish the reports.
The most notable figures scheduled for release this week are non-farm payrolls for September on Friday, the key measure of US employment growth.
Domestically, on Tuesday afternoon the Reserve Bank of Australia will release its monthly cash rate decision.
Economists widely expect the interest rate to stay unchanged at a record low of 2.5 per cent but Ive said any commentary from the RBA on the persistently high Australian dollar will be of interest to markets.
The announcement from the RBA will be at 1430 AEST, half an hour after the midnight budget deadline in the US.
AAP
