The US dollar fell to a record low against the Swiss franc yesterday as a failure to agree on lifting the nation's US$14.3 trillion debt ceiling weighed on the currency.
The dollar also dropped to a four-month low against the yen in Asia, the lowest since the aftermath of Japan's earthquake and nuclear disaster.
The currency remained under pressure earlier this year as low interest rates and economic stimulus measures in the US prompted investors to shun the greenback. Instead, they have invested in other global currencies, and gold, offering better returns.
More recently, concern about a resolution of the government's US$14.3 trillion budget deficit have weighed on the currency.
The dollar dipped 2 per cent against the Swiss franc to an all-time low of 0.8029 franc in London yesterday.
The dollar touched ¥78.12, the lowest since March 17.
"If it was not for the uncertainty over the euro zone the US dollar would arguably be much lower already," said Emirates NBD in a research note yesterday.
Dollar weakness has serious implications. As the world's reserve currency, nearly two thirds of global reserves, including much of the GCC's oil revenues, are denominated in dollars.
A lower dollar affects the GCC because five of the six regional currencies are pegged to the currency. Weakness in the greenback tends to push up the cost of exported goods for the region.
On the positive side, a lower dollar tends to help push up oil prices, meaning greater oil revenues for the region.
Analysts say a failure to reach a breakthrough in the US debt negotiations or a downgrade of the US government's top-notch credit rating could sink the dollar further.
The currency slid 2.5 per cent last year against others.