Dollar up in Asia as US debt deadline looms

TOKYO: The dollar was higher against the yen in Asia Wednesday on cautious optimism that warring US lawmakers will reach a last-minute deal to resolve a budget impasse that threatens to spark a catastrophic default.

The greenback bought 98.50 yen in Tokyo afternoon trade, up from 98.16 yen in New York Tuesday afternoon.

The euro was mixed at $1.3514 and 133.12 yen, compared with $1.3525 and 132.77 yen in US trading.

"Optimistic views still dominate the market," Yuji Saito, director of foreign exchange at Credit Agricole in Tokyo, told Dow Jones Newswires.

"At the same time, with Thursday's deadline just around the corner, people are wondering if they should prepare for the risk (of no deal)," he added.

Despite the dollar's resilience, the unit faces selling pressure as the latest efforts to end the two-week US budget impasse fell apart late Tuesday.

The Republican leadership failed to muster enough support for its own plans to avert default, with barely a day to raise the debt ceiling by the October 17 deadline.

Fitch ratings agency said it may downgrade Washington's AAA credit rating. And the US Treasury has warned that if Congress fails to lift the $17.6 trillion debt ceiling by Thursday, it will lose its ability to borrow and could run out of cash to meet all its obligations.

Dealers said the US government's budget situation and its potential impact on the global economy meant the US Federal Reserve was likely to delay tapering its $85 billion-a-month bond buying programme -- a move that could weigh on the dollar.

Investors will be looking to the Fed's Beige Book later in the day to gauge conditions in the world's biggest economy.

The dollar was mixed against other Asia-Pacific currencies.

It firmed to 11,335 Indonesian rupiah from 10,931 rupiah, to 43.23 Philippine pesos from 43.15 pesos, to 61.83 Indian rupees from 61.67 rupees, while it was flat at Sg$1.2428 and Tw$29.36.

The greenback weakened slightly to 1,066.52 South Korean won from 1,066.75 won, and to 31.25 Thai baht from 31.27 baht.

The Australian dollar was down at 95.20 US cents from 95.33 cents, while the Chinese yuan bought 16.15 yen against 16.10 yen. (AFP)