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Tuesday, July 26, 2011

Dollar Drops to Record Versus Franc as U.S. Struggles With Debt Deadlock

The dollar fell against all of its major counterparts as politicians struggled to agree on raising the U.S. debt limit and reducing its deficit.

The greenback slid below 78 yen for the first time since March and fell to a record versus the Swiss franc on concern America may default and face a reduction in its credit rating. The pound rallied to a one-month high against the dollar after the U.K.’s economic growth matched the forecasts of analysts. Sweden’s currency gained as producer prices increased.

“The uncertainty is weighing on the dollar,” said Aroop Chatterjee, a currency strategist at Barclays Plc in New York. “The smaller the package and the more short-term the measures that are put in place, the more concerned the market will get. The rating agencies have weighed in on the need for a long-term plan to rein in the fiscal deficit.”

The dollar fell 0.3 percent to 78.07 yen at 11 a.m. in New York, from 78.29 yesterday, after sliding to 77.90, the lowest level since March 17. The greenback dropped 0.5 percent to 80.24 Swiss centimes after touching the all-time low of 79.98. The dollar slid 0.8 percent to $1.4497 versus the euro after reaching $1.4522, the weakest since July 5.

Sterling climbed 0.7 percent to $1.6388 after touching $1.6422, the highest level since June 14. The U.K.’s economy grew 0.2 percent in the second quarter, matching the median forecast of 32 economists in a Bloomberg News survey. (more)