FOREX-Dollar climbs to one-month high on debt deal optimism

Reuters

* Signs of progress in U.S. debt talks ease default fear

* Dollar hits one-month high versus currency basket

* Rises 0.8 pct to hit one-month high versus Swiss franc

* RBA minutes help Australian dollar to 4-month high

NEW YORK, Oct 15 (Reuters) - The dollar rose to touch a one-month high against a basket ofcurrencies on Tuesday, buoyed by optimism that U.S. lawmakerscould soon reach a deal to avert a U.S. debt default.

The dollar index rose 0.4 percent to 80.598, itshighest since Sept. 18.

U.S. Senate Majority Leader Harry Reid, a Democrat, said heand his Republican counterpart Mitch McConnell had made"tremendous progress" in talks, and suggested a deal could comeas early as Tuesday.

The comments raised expectations of a deal before a Thursdaydeadline to raise the U.S. debt ceiling. A source said the planwould end a partial government shutdown and cover the country'sborrowing needs at least through mid-February.

"There is a glimpse of good news from the US government andmarkets 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 of98.71 yen, with gains at the session peak marking the 50 percentFibonacci retracement of the move from the Sept 11 peak to theOct 8 low.

But those gains eroded as the New York session opened withthe dollar last down 0.1 percent at 98.44 yen.

The dollar rose to a one-month high against the safe-havenSwiss franc of 0.9177 francs. The dollar was last up 0.6percent at 0.9158 francs.

The dollar also rose against the euro, which failed tobenefit from a survey showing a better than expected Germananalyst and investor sentiment.

The euro fell 0.5 percent on the day to hit atwo-week low of $1.3478.

Analysts said negative impact of the shutdown on the U.S.economy would encourage the Federal Reserve to further delayscaling back monetary stimulus, making the dollar's longer-termprospects less rosy.

"If we get some kind of temporary resolution in the U.S. itwill have a small positive short-term impact on the dollar. Butin the medium term this is clearly dollar negative," saidRichard Falkenhall, currency strategist at SEB in London.

Ian Stannard, head of European FX strategy at Morgan Stanleyin London, said the prospect of U.S. central bank assetpurchases staying at current levels for longer could keephigher-yielding currencies like the Australian dollar wellsupported, potentially lifting it towards $0.9660.

The Australian dollar hit a four-month high againstthe greenback, helped by Reserve Bank of Australia minutes whichshowed no urgency to lower interest rates.

The Australian dollar was last up 0.4 percent at US$0.9522.

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