GLOBAL MARKETS-Stage set for relief rally in Asia as Washington deal nears

Reuters

* Deal to end U.S. fiscal impasse and avert default nears

* Wall Street rallies, Asian stocks set to follow barringany last-minute glitches

* Australian dollar hit four-month highs as risk appetitegrows

By Ian Chua

SYDNEY, Oct 17 (Reuters) - Australian shares opened higheron Thursday, setting the stage for a relief rally in Asia withWashington on the cusp of securing a deal to lift thegovernment's borrowing limit and avoid a historic default.

U.S. Senate leaders hammered out an agreement to break thefiscal impasse late on Wednesday, paving the way for U.S.lawmakers to end the drama in Washington just hours before thegovernment exhausts its borrowing authority.

If it goes without a hitch, the deal should pass throughSenate, then the House of Representatives, before PresidentBarack Obama signs it into law.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent in early trade as Australia'sS&P/ASX 200 index climbed 0.4 percent.

U.S. S&P 500 e-mini futures were little changed,taking a breather after a 1.2 percent rally.

Wall Street closed more than 1 percent higher on Wednesdayon signs that a resolution was imminent, bringing the S&P 500index within striking distance of a record high set lastmonth.

The deal, however, does not resolve the fundamental issuesof spending and deficits that divide Republicans and Democrats.It funds the government until Jan. 15 and raises the debt limitthrough to Feb. 7, so global markets face the possibility ofanother showdown in Washington early next year.

"The can has been kicked further down the road... the resetbutton has been pushed and we will go thought this all again intwo months time," said Evan Lucas, market strategist at IG inMelbourne.

But Lucas expected "normal trading" to return over thecoming days as the earnings season kicks into gear.

The breakthrough couldn't have come at a better time forcompanies including Malaysia's UMW Oil & Gas, South Korea'sHyundai Rotem and the Philippines' Travellers International,which plan to raise about $1.7 billion in the IPO market. Thedeals are expected to be priced later on Thursday.

In the currency markets, the improved risk appetite sawinvestors favour high-yielding currencies including theAustralian dollar.

The Aussie dollar hit a 4-month high of $0.9574 andscaled a 4-1/2 month peak of 94.46 yen.

The dollar index , which tracks the greenback'sperformance against a currency basket, was steady at 80.517,having reached a one-month high of 80.745 overnight.

Many traders are already trying to get past the fiscal dramaand looking to see when a backlog of U.S. economic dataincluding the September payrolls will be released once thepartial government shutdown is lifted.

Once the antics are over in Washington, the markets willlikely re-focus their attention on the economic releases and thetimeline for the U.S. Federal Reserve's tapering of itsbond-buying programme - a major driver of global assets inrecent months.

The Fed stunned markets last month by electing to delay thestart of the stimulus reduction.

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