BackDollar climbs to one-month high on debt deal optimism
The dollar index rose 0.4% to 80.598, its highest since 18 September
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New York: The dollar rose to touch a one-month high against a basket of currencies on Tuesday, buoyed by optimism that US lawmakers could soon reach a deal to avert a US debt default.
The dollar index rose 0.4% to 80.598, its highest since 18 September.
US Senate majority leader Harry Reid, a Democrat, said he and his Republican counterpart Mitch McConnell had made “tremendous progress" in talks, and suggested a deal could come as early as Tuesday.
The comments raised expectations of a deal before a Thursday deadline to raise the US debt ceiling. A source said the plan would end a partial government shutdown and cover the country’s borrowing needs at least through mid-February.
“There is a glimpse of good news from the US government and markets are adding to risk positions," said Camilla Sutton, chief currency strategist at Scotiabank in Toronto.
The dollar touched a two-week high against the yen of ¥98.71, with gains at the session peak marking the 50% Fibonacci retracement of the move from the 11 September peak to the 8 October low.
But those gains eroded as the New York session opened with the dollar last down 0.1% at ¥98.44.
The dollar rose to a one-month high against the safe-haven Swiss franc of 0.9177 francs. The dollar was last up 0.6% at 0.9158 francs.
The dollar also rose against the euro, which failed to benefit from a survey showing a better than expected German analyst and investor sentiment. The euro fell 0.5% on the day to hit a two-week low of $1.3478.
Analysts said negative impact of the shutdown on the US economy would encourage the Federal Reserve to further delay scaling back monetary stimulus, making the dollar’s longer-term prospects less rosy.
“If we get some kind of temporary resolution in the US it will have a small positive short-term impact on the dollar. But in the medium term this is clearly dollar negative," said Richard Falkenhall, currency strategist at SEB in London.
Ian Stannard, head of European FX strategy at Morgan Stanley in London, said the prospect of US central bank asset purchases staying at current levels for longer could keep higher-yielding currencies like the Australian dollar well supported, potentially lifting it towards $0.9660.
The Australian dollar hit a four-month high against the greenback, helped by Reserve Bank of Australia minutes which showed no urgency to lower interest rates.
The Australian dollar was last up 0.4% at US$0.9522.
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