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Dollar's funk will continue until clouds clear in Washington

Oleg Prikhodko | E+ | Getty Images

The dollar has been in a funk and is not likely to shake it until Washington resolves the budget and debt ceiling crises.

"Clearly the dollar is not really playing that much of a safe-haven role through this latest episode," said Vassili Serebriakov, currency strategist at BNP Paribas.

The greenback has been on a course lower since just around Sept. 6, the day the disappointing August jobs report was released, showing just 169,000 jobs created. That was the last major piece of data received by the Fed before its September meeting, when it decided to continue full throttle with its bond-buying program, a negative for the dollar.

(Read more: Euro thrives as ECB's Draghi stays course; dollar struggles)

The market then focused on the Sept. 30 deadline by which Congress needed to fund the government, weakening the dollar further. Congress failed to meet that deadline and the government shutdown Tuesday has created new anxiety about how the closure will affect the economy and whether Congress will step up to resolve it and the much thornier issue of the debt ceiling.