President Joe Biden asked Congress to avoid a government shutdown due to lack of funds. The U.S. credit rating and dollar could be affected otherwise.
Moody's, the only major credit rating agency to still give U.S. sovereign credit a top, AAA, rating, on Monday said a shutdown would affect that rating.currency issuer default rating."While government debt service payments would not be impacted and a short-lived shutdown would be unlikely to disrupt the economy, it would underscore the weakness of US institutional and governance strength relative to other AAA-rated sovereigns that we have highlighted in recent years.
Moody's added,"In particular, it would demonstrate the significant constraints that intensifying political polarization put on fiscal policymaking at a time of declining fiscal strength, driven by widening fiscal deficits and deteriorating debt affordability." Wells Fargo analysts in a note Tuesday said a shutdown could lead to the U.S. dollar index falling by around 1% to 1.5% in the upcoming weeks.
"A potential U.S. government shutdown that could start October 1st looms, the chances of which are more or less seen as a coin flip at this point," Wells Fargo analysts wrote. "Should a shutdown transpire, there could be a negative impact of the U.S dollar, albeit one that is likely to be modest and short-lived."
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