Dollar Falls, Gold Rises With No Debt Progress

(Reuters) - Asian stocks and the U.S. dollar fell on  Wednesday while gold hit a record high at more  than $1,623 an ounce, as a drip feed of news out  of Washington indicated politicians were making  little progress on a plan to lift the U.S. debt ceiling. The Australian dollar jumped to a post-float high above $1.1050 after second  quarter inflation figures were higher than forecast, squeezing investors who  had recently increased bets that the Australian central bank would cut rates  this year. The Australian dollar and other Asia-Pacific currencies have been rising as  traders anticipate more action by policymakers to keep quickening inflation  at bay as well as the possibility of more capital inflows heading to the region  as investors take refuge from debt crises in the U.S. and Europe. The threat of a U.S. default and a credit rating downgrade loomed over equity  markets and the dollar, which was sold across the board on Tuesday, though  a one-notch cut may not have a lasting impact on markets. "The impact of a credit downgrade on the financial markets would be negative  for growth. The induced shocks to the economy could lower next quarter's real  GDP growth to close to zero. However, a likely rebound in Q4 growth, following  a resolution of the budget debacle, could leave growth in the second half lower  by 0.6 percent," said Michael Carey, North American chief economist with Credit  Agricole, in a note. The crisis over Washington's borrowing limit has not triggered a broad and  lasting selloff in risky assets, especially since many investors see few alternatives  to the depth of the U.S. Treasury market and contrast the political nature of the  U.S. crisis with the structural problems in the euro zone. Most market watchers expect some sort of last-minute deal in Washington. But the  intense standoff has made investors increasingly hedge against an adverse  outcome, particularly with seven days to go before an August 2 deadline when the  U.S. Treasury said it would not be able to borrow anymore. Japan's Nikkei share average was down 0.7 percent .N225, led by Honda Motor  Co shares, which were down 1.7 percent (7267.T) in early trade. The MSCI index of Asia Pacific stocks outside Japan was steady .MIAPJ0000PUS,  while benchmark indexes in South Korea .KS11 and Australia .AXJO were down  slightly. The U.S. dollar index, which gauges its value against a basket of six other major  currencies, edged down 0.1 percent to a fresh 2-1/2-month low at 73.42. The dollar hit a four-month low against the yen, just below 77.80, though the  march lower has been sluggish because of fears that Japan may step in  unilaterally into markets to slow their currency's gains. Japanese policymakers are becoming alarmed at persistent yen rises and  considering solocurrency intervention as an increasingly viable option for the  near term, sources with knowledge of the matter told Reuters on Tuesday. In commodity markets, gold climbed to an all-time high of $1,623.31 an ounce,  having risen 14.3 percent so far this year, more than double the S&P 500  index's 6 percent gain so far. U.S. crude oil futures fell 44 cents to $99.16 a barrel, while Brent crude futures  were little changed at $118.22. source: www.publicgold.com.my http://www.reuters.com/article/2011/07/27/us-markets-global-idUSTRE76N2XJ20110727