Dollar mixed as US budget talks bog down

US Currency. AP FILE PHOTO

NEW YORK CITY—The dollar traded mixed Tuesday amid bogged-down US budget and debt ceiling talks that prompted Fitch to warn it could downgrade the US AAA credit rating.

The euro was trading at $1.3525 around 2100 GMT, down from $1.3559 at the same time Monday.

The Japanese currency, often considered a safe haven in times of uncertainty, firmed. The dollar fell to 98.16 yen from 98.67 yen Monday and the euro tumbled to 132.77 yen from 133.79 yen.

Financial markets were on tenterhooks as Washington politicians remained deadlocked over a deal to reopen the federal government and avoid default on its debts.

The US Treasury has warned that if Congress fails to lift the $17.6 trillion debt ceiling by Thursday, it will lose its ability to borrow and could run out of cash to pay all its obligations.

After the US stock markets closed, Fitch announced it had placed the United States’s AAA credit rating on watch for a downgrade. It said the prolonged debt-ceiling negotiations risk “undermining confidence in the role of the US dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the US.”

Tuesday marked the 15th day of a partial federal government as the White House and Republicans battled over funding for the 2014 fiscal year that began Oct. 1.

“For the past two weeks, investors have been hopeful that Congress will pass a bill that will avoid the first-ever default,” said Kathy Lien of BK Asset Management.

“But 15 days into the US government shutdown and with just under 36 hours to go before the Treasury reaches its borrowing limit, their optimism is fading quickly.”

“Many investors fear that if the US defaults on its debt, the dollar will collapse,” she said.

The dollar strengthened against the Swiss currency, to 0.9122 franc from 0.9102 franc Monday.

The pound rose to $1.5997 from $1.5980.