The U.S. Dollar firmed during the Tuesday session in Asian, touching on a 2-week peak versus the safe haven Japanese Yen after indications of an impending deal between the two main political parties in the U.S. hinted that the stalemate would soon be drawing to a close. According to the press, the Senate Majority Leader confirmed that strong progress had been made toward reaching an agreement, which allayed investors’ fears that the U.S. Treasury might have to default on maturing debt. There is, however, still the need for any Senate-driven agreement to be approved by the U.S. House of Representatives, where many Republican Congressmen continue to maintain that spending cuts must be included in the budget deal.
As reported at 11:30 a.m. (JST) in Tokyo, the U.S. Dollar Index traded higher at 80.367 .DXY, moving away from the low of 80.126 .DXY struck on Monday and distancing itself from the 8-month trough struck just after the stalemate began more than two weeks ago. The USD/JPY pair traded at a high of 98.71 Japanese Yen before edging lower to 98.64 Japanese Yen, still nearing a 2-week peak. The EUR/USD was flat at $1.3550, staying within a recent trading range.
Prospect of Temporary Debt Ceiling Disappoints
One key element that markets are not too happy about is that the Senate’s version of the brokered deal is only a temporary solution to the debt ceiling, likely through mid-February 2014 only, or long enough to continue to fund the government’s operations through mid-January, meaning yet another battle of wills ahead.