* House Republicans to propose short-term debt-limit hike
* U.S. jobless claims rise to six-month high
* Dollar still vulnerable if no debt resolution found
NEW YORK, Oct 10 (Reuters) - The dollar climbed to atwo-week high against major currencies on Thursday on risingoptimism Washington lawmakers might reach a deal to avert a U.S.default.
Republicans in the House of Representatives said they wouldpropose legislation for a short-term debt limit increase toavoid a U.S. debt default. House Speaker John Boehner said theshort-term increase is conditioned on an offer by Democrats tostart negotiations on fiscal issues.
The dollar came under pressure early this week as thegovernment shutdown dragged on and fears intensified overwhether Congress would raise the federal debt ceiling by theOct. 17 deadline.
The U.S. currency was boosted by a rise in Treasury yields and minutes from the Federal Reserve's Septembermeeting that suggested most board members supported taperingbond purchases later this year.
The dollar index, which measures the greenbackagainst a basket of six major currencies, rose as high as80.595, the strongest since Sept. 26, extending its recoveryfrom an eight-month low of 79.627 hit last Thursday. It was lastat 80.471, up 0.1 percent on the day.
The dollar rallied 0.9 percent to 98.24 yen,rebounding from a two-month low of 96.55 yen hit on Tuesday.Traders said the dollar rebounded after finding strong supportat its 200-day simple moving average, currently at 96.82.
The euro was little changed at $1.3523.
Volumes in the euro/dollar and dollar/yen on Reuters Dealingwere the highest since Oct. 3.
The dollar briefly pared its gains versus the yen and hit asession low versus the euro after data showed the number ofAmericans filing new claims for unemployment benefits hit asix-month high last week. But that move wasfleeting.
Despite signs of rapprochement in Washington, the dollarcould still be vulnerable to concerns about a debt default.Short-term U.S. government bill yields were at the highest sincethe 2008 financial crisis, reflecting investor anxiety.
"I would not be surprised to see some take profit in thedollar after the recent run. The situation has not reallychanged, and risk fear is mounting and the VIX is still justbelow 20 percent," said Francesco Scotto, portfolio manager at RTFX Fund Management Ltd.
Wall Street's favorite anxiety index, the VIX index,last traded down 16.1 percent at 16.44 after hitting 21.34 onWednesday. A level above 20 is generally associated withincreasing concern about the near-term direction of the market.
Banks and money market funds are beginning to shun someTreasuries normally used as collateral in the $5 trillionrepurchase agreement market.
The Treasury Department says it will be unable to pay all ofits bills if Congress does not raise the $16.7 trillion debtceiling by Oct. 17. Republicans say the Obama administrationwould be able to keep up with its bond payments at the expenseof other obligations if that deadline was missed but TreasurySecretary Jack Lew said that's not possible.
"It would be chaos," he told the Senate Finance Committee.