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Euro, dollar undermined by politics, boosts franc

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The dollar dropped against an array of currencies on Monday, as an 11th-hour deal to resolve a Washington budget battle remained elusive, raising the possibility of a partial government shutdown as soon as tomorrow.

The Senate rejected the House's budget bill, making the shutdown of many agencies at midnight much more likely.

In a 54-46 vote, the Senate on Monday stripped provisions that would have delayed the implementation of Obamacare by a year, and instead sent an emergency spending bill to the House, where its fate is uncertain.

Month-end and quarter-end positioning held sizeable sway over market activity, causing the dollar to sharply pare losses against the yen in late morning New York trade, traders said, but uncertainty about a U.S. government budget deal should continue to weigh on the greenback.

last traded 0.5 percent lower against a basket of six major currencies to trade at 80.15, above an earlier trough of 80.030, its lowest since February. The index, at current prices, has fallen about 2.4 percent in September, its worst month since October, 2011. For the quarter it notched a roughly 3.6 percent loss, its weakest performance since the first quarter of 2011.

The dollar slid to a one-month low at 97.53 yen before rebounding a touch to near 98 yen. It was cushioned by hopes that Japanese Prime Minister Shinzo Abe might unveil big fresh economic steps on Tuesday to mitigate the impact of a hike in sales tax he is likely to announce on the same day.

Against the dollar, the fell was marginally changed around $1.35, though it was supported for now by month-end and quarter-end buying by Asian accounts.

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