TOKYO: The U.S. dollar and Asian shares held steady on Tuesday as investors waited with bated breath just hours before a deadline that will see much of the U.S. government begin to shut down, which could crimp growth in the world’s largest economy.
U.S. President Barack Obama urged Republicans in Congress to reach an 11th-hour deal to avert any economic harm.
A prolonged shutdown could have a major impact on the U.S. economy and consumer confidence. As many as 1 million federal employees could face unpaid furloughs. But it is unlikely to affect the United States’ sovereign credit rating.
Investors are accustomed to political battles in Washington resulting in a last-minute accord and voiced skepticism any shutdown would last for an extended period.
“It may have a knock-on effect on the timing of the potential tapering (by the Federal Reserve). It could have a knock-on effect on the production of economic data. It could have a real impact on consumption if it lasts for more than a day,” said a senior trader at a foreign bank in Tokyo.
“People in the market are kind of interpreting this as a kabuki drama if you like, but we are little more concerned than that.”
The dollar stood at 98.39, having climbed off a one-month low of 97.50 on Monday as Japan’s Prime Minister Shinzo Abe was expected to announce his economic growth and tax strategy later on Tuesday.
In Tokyo, the Nikkei share average advanced 0.4 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan were flat. Regional trading activity was expected to be light with China and Hong Kong closed for National Day.
S&P stock futures edged 0.2 percent higher after the cash index slipped 0.6 percent on Monday.
Earlier, the Democrat-controlled Senate shot down a proposal by the Republican-led House of Representatives to delay Obama’s health care program for a year in return for temporary funding of the federal government beyond Monday.
The bill, which would run through Nov. 15, was aimed at averting a government shutdown. It now goes back to the House, where Republicans will seek a one-year delay in the Obamacare requirement for all individuals to obtain health insurance as part of the spending bill.
In the commodity markets, gold inched up 0.1 percent to about $1,328 an ounce after gaining 7.6 percent in July-September, snapping three straight quarters of decline.