* Dollar index near 8 month low
* Fed tapering seen unlikely rest of year
* Tuesday's US payroll data one of next biggest focus
* In Asia, Chinese data likely to set tone
By Hideyuki Sano
TOKYO, Oct 18 The dollar nursed losses near an
eight-month low against a basket of currencies on Friday as
traders focused on the economic impact of an acrimonious
showdown in Washington that dragged the U.S. to the brink of a
The potential damage to the economy from the weeks-long
government shutdown could discourage the Federal Reserve from
scaling back its stimulus programme at least until the beginning
of next year.
"The markets are driven by expectations that the Fed will
have to maintain its stimulus," said Sho Aoyama, senior market
analyst at Mizuho Securities.
U.S. Democrats and Republicans reached an 11th-hour
agreement on Wednesday to break the fiscal impasse. The deal
funds the government until Jan. 15 and raises the borrowing
limit through to Feb. 7.
The first wave of U.S. data released on Thursday after the
government returned to work was fairly upbeat. But the main
focus is squarely on the September payrolls report, which the
Labor department said will be published on Tuesday.
The dollar index stood at 79.693 in early
Asian trade, having fallen to as low as 79.613 on Thursday, its
lowest level since early February.
The dollar's fall partially reflected the rise in
risk-sensitive currencies as expectations of continued U.S.
stimulus helped to boost Wall Street shares, with the S&P 500
index hitting a record high on Thursday.
The euro traded at $1.3669, having risen as high as
$1.3682 on Thursday, just shy of this year's peak of $1.3711.
A daily close above that peak would be a very bullish
development that is likely to lead to a test of $1.38233, a 61.8
percent retracement of the euro's decline from 2011 to 2012,
George Davis, chief technical analyst at RBC Dominion Securities
in Toronto, said in a report.
Against the yen, the euro held near four-year highs of
134.95 yen hit a month ago, trading at 134.02.
The dollar was on the defensive against the Japanese
currency as fall in U.S. bond yields undermined the greenback's
yield allure. The dollar stood at 98.01 yen, a full yen
below a three-week high of 99.01 yen touched on Thursday.
Some market players also speculate the latest political
paralysis in Washington might have dented long-term credibility
in the dollar, with partisan wrangling looking set to return
early next year when the current spending and borrowing
agreement are set to expire.
"The dollar has traded very poorly on the back of the debt
ceiling resolution," said Jens Nordvig, global head of currency
strategy at Nomura in New York.
"It is hard to know if it is about a delay in growth and
(Fed) tapering, or whether investors are starting to demand a
political risk premium on the dollar. In any case, we are not
inclined to trade the dollar from the bullish side at this
In Asia, a raft of Chinese economic data due later on Friday
is in focus. Solid readings could push the Australian dollar
higher to fresh four-month highs given China is Australia's
major export market.
The Aussie changed hands at $0.9620, not far from
Thursday's four-month high of $0.9647.