* Possible US government shutdown, lack of Fed clarity weigh
* World shares hold near one-week low
* German consumer confidence hits 6-year high
* Oil above $109 as little thaw seen in US, Iran relations
By Richard Hubbard
LONDON, Sept 25 The dollar fell and world shares
held near a one-week low on Wednesday as concerns over a
potential government shutdown in Washington and mixed signals on
U.S. monetary policy kept investors on edge.
U.S. stock index futures point to a mixed open for Wall
Street following four days of losses where the broad S&P 500 is
on its longest losing streak since last month.
A vote is due in the U.S. Senate later on a motion that will
allow the government to keep running beyond the end of the month
when budgets are due to expire, though lawmakers have yet to
find enough common ground to ensure its passage.
Investors, wrong-footed by last week's surprise decision by
the Federal Reserve not to begin trimming its bond-buying
stimulus, are also still debating the central bank's next steps
and what mixed signals from policymakers say about the economy's
"We're not seeing a post-Fed party as perhaps the market was
initially expecting, and that's causing some safe-haven flows,"
said Simon Smith, chief economist at FXPro.
The dollar had eased 0.2 percent to 98.50 yen from
late U.S. levels on Tuesday and equally was down 0.2 percent
against a basket of six major currencies.
The euro was firmer against the dollar at around the $1.35
level, supported by data showing German consumer
confidence was running at a six-year high heading into October.
The MSCI world equity index, which tracks
shares in 45 countries, was flat on the day though it remains
about 1 percent below the highs reached in the rally which
immediately followed last week's Fed decision.
European stocks had fallen 0.35 percent by midday,
mirroring losses earlier in Asia, where MSCI's broadest index of
Asian shares outside Japan slipped 0.2 percent.
Japan's Nikkei fell 0.8 percent despite news of
Applied Materials Inc's buyout of Tokyo Electron Ltd
, bringing together two of the world's biggest computer
chipmakers to create a company with a market value of $29
While concerns about the U.S. budget talks were foremost in
keeping the dollar under pressure, traders were also focused on
the looming talks on raising the government's borrowing limit,
needed to avoid the risk of a debt default.
Any default would rock Wall Street and could even trigger
another economic crisis in a nation still struggling to recover
from the 2007-09 recession.
The last debt ceiling showdown in 2011 pushed the United
States to within days of missing payments and led ratings agency
Standard and Poor's to strip Washington of its triple-A credit
"There is a deep reluctance to buy dollars until the picture
around the debt ceiling becomes clearer," said Derek Halpenny,
European head of global currency research.
U.S. Treasuries have reacted cautiously to the political
developments, holding steady with the yield on the benchmark
10-year note at 2.65 percent, near a six-week low.
The upbeat German consumer confidence data backed up
Tuesday's Ifo business morale survey in pointing to a steady
recovery in the euro zone's biggest economy although recent weak
industrial production numbers and a drop in exports have
combined to leave a mixed picture overall.
Ten-year cash German yields fell 1 basis point
to 1.79 percent, supported by comments from European Central
Bank officials this week that the central bank stood ready to
pump another round of money into banking markets if need be.
On commodity markets, steady buying from top consumer China
pushed copper futures up 0.4 percent to $7,178.25,
putting them on track to snap a three-session losing streak.
Gold rose 0.3 percent to $1,327.25 an ounce,
extending Tuesday's gains, which had followed three sessions of
Oil prices firmed against a backdrop of hopeful signals that
long-standing tensions in the Middle East could be easing.
U.S. President Barack Obama on Tuesday cautiously embraced
overtures from Iran's new president as the basis for a possible
nuclear deal, but a failed effort to arrange a simple handshake
between the two leaders underscored entrenched distrust that
will be hard to overcome.
"There are some hopes there might be a gradual forging of a
relationship between the West and Iran, though it's still early
days," said Ric Spooner, chief market analyst at CMC Markets.
Front-month Brent crude for November delivery rose
about 0.85 percent to $109.57, while November U.S. crude
added 0.5 percent to $103.63 a barrel.