Wednesday, July 27, 2011

Dollar plunges amid US debt impasse

Source: Press TV

The dollar has sunk to a three-month low against a basket of major currencies following US lawmakers' failure to reach a deal on the federal government's debt ceiling.

The dollar sank further against the euro on Wednesday both in Asian and European markets, sending the EU single currency to the high levels of $1.4520 and $1.4530, AFP reported.

This comes after the White House threatened that President Barack Obama would veto a Republican plan on raising the debt ceiling.

The plan proposed by House Speaker John Boehner would impose $1.2 trillion in spending cuts, and establish a select congressional commission to propose an additional $1.8 trillion in savings by Thanksgiving, November 24, 2011. The plan, in general, aims for about $3 trillion in spending cuts over 10 years.

Democrats including the president himself argue that the Republican deficit plan will enslave the American people by taking benefits away from Social Security, Medicare, education and other social institutions.

So far, no agreement is in sight between the White House and the House Republicans to avoid a debt default, as the continuing impasse has raised the threat of the world's biggest economy failing to service its $14.3 trillion dollar short-term debt on August 2.

Investors are concerned that even if the default is averted, the deadlock will lead to the downgrade of US' credit rating.

The US debt ceiling is capped at $14.3 trillion, up from $10.6 trillion when President Obama took office in 2009, and the administration says that if it is not elevated by August 2, the government would default on its obligations.

The International Monetary Fund (IMF) has urged the United States to take immediate fiscal action regarding its debt crisis, as the country is nearing a default.

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