The U.S. dollar fell on Thursday as traders piled into the euro, yen, sterling and other major currencies amid concerns over a possible U.S. government shutdown as lawmakers struggled to cobble together a federal budget deal.
If an agreement to fund government operations, even a temporary one, is not reached by the Friday deadline, it would compound an already-negative climate for the greenback, analysts said.
"Politics are sabotaging economics," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. "It's the uncertainty about the U.S. budget deal. We are going to see further pressure on the dollar if there isn't a deal."
Republican lawmakers are scrambling to pass a temporary measure to keep the government open. A House vote on the funding extension is expected after 2:30 p.m.
The euro hovered below its three-year peak against the greenback. It was up 0.39 percent at $1.2234.
The greenback reversed gains from late Wednesday after Apple said it would make about $38 billion in one-time tax payments on its overseas cash holdings, though analysts expect the impact on currency markets is going to be limited.