Dollar falls across the board amid worries over debt

The dollar was mixed on Friday as US debt worries pressured the currency, while support for the greenback came as some investors sold the euro to lock in profit before the Easter holiday.

The dollar stood at 81.68 yen, slightly off from 81.85 yen in New York on Thursday. The euro bought $1.4546 and 118.96 yen against $1.4550 and 119.11 yen in New York.

The prospect of low US interest rates being kept in place and lingering concerns about the country’s massive debt appeared to weigh on markets.

Standard and Poor’s shook the markets last Monday when it downgraded its rating outlook on US debt for the first time ever, putting the spotlight on Washington’s consistent failure to stabilise the US public finances.

Meanwhile, the euro benefited from expectations of more interest rate rises for the eurozone to tackle rising prices.

Thin trading was expected in Asia, as Western dealers kept their hands off the market ahead of the Easter weekend, with a series of public holidays in many countries but not in Japan. Lingering concerns about US debt weighed on markets, while position adjustment ahead of the holiday slightly lifted the yen, said a senior trader at a major Japanese bank.

“We assume the dollar’s downside adjustments over the past several days are mostly completed and quiet trading can be expected in Tokyo because (most) other major financial markets in Asia are closed for the holiday,” he said.

Meanwhile, the Japanese finance minister reiterated his resolve to ensure fiscal discipline after the government approved a four trillion yen (€33.56 trillion) extra budget for reconstruction after the March 11 earthquake.

“I would like to take measures, keeping in mind that (international organisations and markets) are watching us on the issue of fiscal reform,” Noda told reporters.

The Organisation for Economic Cooperation and Development on Thursday called on Japan to raise consumption tax to cut the nation’s debt, which stands at nearly 200 per cent of Japan’s economy.