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Dollar index hits 8-mo. low as government shutdown drags on

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The U.S. dollar fell for a fifth straight session against a basket of major currencies on Thursday, hitting an eight-month low, as investors fretted about a partial U.S. government shutdown that dragged on for a third day.

While a short-term government closure is expected to have a limited effect on the U.S. economy, the impact will be greater should the impasse continue. A prolonged shutdown could prompt the Federal Reserve to postpone withdrawing monetary stimulus, which will weigh on the dollar in the near term.

President Barack Obama met with Republican and Democratic leaders in Congress late Wednesday to try to break the budget deadlock that has shut down wide swaths of the government, but there was no breakthrough and both sides blamed each other. Obama's health-care law was at the center of the impasse.

The dollar index, which tracks the greenback against six currencies, hit a trough of 79.740, its lowest since February. It last traded at 79.77, down 0.1 percent on the day. The euro dominates the composition of the index.

The dollar extended losses versus the euro and pared gains versus the yen after U.S. data showed growth in the services sector cooled last month as the pace of new orders dipped and hiring slowed.

In New York trade, the euro was up 0.3 percent at $1.3619 after hitting its highest levels since Feb. 1.

Higher-than-expected retail sales, a recovery in the euro zone services sector, along with a jump in Italy's services sector all underpinned the single currency.

Improved political stability after the Italian government won a confidence vote on Wednesday also helped.

Against the yen, the euro was up 0.3 percent to 132.49 yen, while the dollar was down 0.1 percent to 97.28 yen, not far off the previous day's five-week low of 97.12 yen, according to Reuters data.

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