The safe-haven Swiss franc gained on Tuesday on worries about the global economy even as the US looked to have averted a debt default after the House of Representatives approved an 11th hour deal to raise the government's borrowing limit. Strength in the yen also drew more warnings from Japanese officials about possible intervention and nudged the Bank of Japan closer to a further easing in policy.
The US debt bill will now need to clear the Senate, which is expected to approve the $2.1 trillion deficit-cutting plan. "While the political cloud of uncertainty may lift somewhat, the economic storm clouds are darkening," Yelena Shulyatyeva, an economist at BNP Paribas wrote in a client note.
The Swiss franc held near record highs against the euro and dollar, having risen strongly overnight after reports on Monday showed the world's manufacturing sector expanded at its weakest pace in two years last month. "Clearly, the report raises worries that the sector, which has been a key engine of growth during the current recovery, is losing steam reflecting a weakening around the globe in manufacturing," Shulyatyeva said.
The dollar fell 0.3 percent to 0.7815 Swiss francs, having plumbed an all-time low around 0.7730 overnight. The euro also slipped 0.3 percent to 1.1130 francs, not far off a record low near 1.1025. The dollar rose 0.3 percent to 77.44 yen having set a four-month low of 76.29 yen the previous day on EBS, close to its record trough of 76.25 yen hit after the March 11 earthquake.
Masanari Takada, a forex strategist at Nomura Securities, said there is a chance Japanese authorities could intervene should the dollar approach its all-time low, a level where a slew of option-related sell orders are rumoured to be placed. The euro was down 0.1 percent at $1.4241. It was still near two-week lows around $1.4184 plumbed overnight. The Aussie last changed hands at $1.0925, down 0.4 percent from late US trade on Monday.
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