The White House sex scandal spilled over into US financial markets yesterday as traders began to Stocks turned negative on Wall Street and the bond market and dollar also declined.
The Dow Jones industrial average closed 30.39 points lower at 7.700.49. Investors are worried about the prospect that Mr Clinton could face an obstruction of justice charge, due to allegations that he urged a former aide to lie under oath about their alleged affair.
As a result, the pound has risen from $1.36 before news of the affair broke on Wednesday night to close at $1.41 yesterday.
According to Mr Kevin Daly, economist at Ulster Bank, the markets would be happy if the vice-president, Mr Al Gore, were to take over. However, the alternative among the Republicans and the other side of the Democratic Party is seen as a return to protectionism and the end of a policy for a strong dollar, he added.
Mr Larry Watchel, of Prudential Securities, said investors feared the scandal could eventually affect Mr Clinton's ability to carry out his policies.
"There is tremendous uncertainty in the (bond) market," said Mr Steven Sifer, chief economist at Lehman Brothers.At the same time, uncertainty about Clinton's future in power is creating concerns about a number of policies, from the tobacco industry settlement, to funds for the IMF and America's role in the Asian recovery."
Mr Stephen Gallagher, an economist with Societe Generale said that the scandal "gives us an excuse to correct on (the) dollar, we saw profit-taking and people are getting out from any long positions on dollars", Mr Gallagher added. "Clinton is critically damaged even if he survives and that's not good."
Mr Henry Willmore, of Barclays Capital, said the scandal "does undermine the confidence of some investors in US assets". The latest scandal revolves around Ms Monica Lewinsky (24), who is reportedly to have been advised to lie about an affair with Mr Clinton in testimony in a separate sex harassment case. President Clinton has denied all charges, which could lead to impeachment.
But independent counsel Mr Kenneth Starr expanded his probes of Whitewater and other White House affairs to include this episode after a co-worker, Ms Linda Tripp, secretly taped Ms Lewinsky and gave Mr Starr the recordings.
