US dollar declines as parties spar over debt ceiling

The US dollar has fallen against other major currencies as talks continue over how to reach a deal to avert a US debt default.

The US dollar was at $1.6391 against the UK pound, from $1.6280 late on Monday. The dollar was also down against the euro, to 1.4465 from 1.4378, and against the Swiss franc.

The US risks default without a deal to raise the borrowing limit by 2 August.

Meanwhile, stocks fell over continued fear of high levels of debt in Europe.

Both Spain and Italy, countries with huge levels of debt, have been forced to borrow at higher interest rates - despite a deal last week that aimed to solve the Greek debt crisis.

Spain borrowed 2.9bn euros ($4.2bn; £2.6bn) in short-term debt, paying an interest rate of 2.519% to borrow for six months, up sharply from 1.776% previously.

Italy had to pay 2.269% to borrow for the same amount of time - up from 1.988%.

Last week, eurozone leaders agreed a new 109bn-euro bailout for Greece and expanded the role of the European rescue fund to alleviate pressure on other indebted countries like Spain and Italy.

Debt talks

In the US, President Barack Obama and Republican House Speaker John Boehner have blamed each other for the deadlock over the debt ceiling.

The federal government runs a budget deficit that topped $1.5tn (£920bn) this year, and has amassed a national debt of $14.3tn.

Votes to raise the US debt limit have historically been a matter of routine in the US Congress, but this year, Republicans have refused to agree to a debt increase without significant reductions in the budget deficit.

If the debt ceiling is not raised, the US Treasury could run out of money to pay all of its bills - which could lead to interest rate rises, threaten the US economy and in turn the global recovery.