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Dollar tumbles amid debt concerns, sluggish economy

08-01-2011 08:30 BJT

NEW YORK, July 29 (Xinhua) -- The U.S. dollar fell this week, as no progress was made on debt ceiling talks in the United States and data showed the world's largest economy remained weak in the second quarter.

For now, the biggest dispute between the Republicans and Democrats over the debt issue is how to rein in the country's fiscal deficit.

President Barack Obama urged congressional leaders to agree on a "fair compromise" for cutting the federal deficit and raising the debt ceiling in "the next few days," while House Speaker John Boehner, the top Republican in Congress, called on them to back up a Republican plan to solve the problem.

The disagreements between the two parties on the debt issue have worried investors, as the risk of a damaging government debt default is mounting.

The Republicans' plan aimed at cutting spending by 917 billion dollars over the next 10 years drew most of the attention this week. It cleared the House, but was defeated in the Senate.

The stalemate in the U.S. debt ceiling talks spooked investors in foreign exchange markets, as they allocated more funds to other safe-havens rather than the dollar. The Swiss franc rose to record highs against the dollar this week, as the dollar index lost 0.6 percent.

Meanwhile, economic data released this week added to investor concerns. The U.S. Commerce Department reported U.S. gross domestic product rose by an annulized rate of 1.3 percent in the second quarter, lower than the previous estimate of 1.8 percent. The first quarter growth was revised sharply downward to 0.4 percent from 1.9 percent.

A Federal Reserve report on Wednesday indicated that economic activities continued to grow in June and early July. However, the pace has moderated in many regions.

Durable goods orders fell 2.1 percent in June, suggesting companies still show a lack of interest in expanding their businesses.

However, data from job markets showed signs of recovery. The Labor Department reported initial jobless claims last week slipped by 24,000 to 398,000, the first time the figure had fallen below 400,000 since April.

Outside the U.S., the European debt problems are far from resolved. The rating agency Standard & Poor's further cut Greece's sovereign credit rating, saying the European Union's latest bailout plan would put the country into "selective default."

The euro gained 0.21 percent against the dollar this week as investors were dampened by debt concerns in both economies.

The British pound advanced 0.73 percent against the dollar, as the Britain's Office for National Statistics said Tuesday the country's economy expanded 0.2 percent in the second quarter, compared with the first quarter.

Editor:Li Wanran |Source: Xinhua

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