* Signs of progress in U.S. debt talks ease default fear
* Dollar hits one-month high versus currency basket
* Dollar up 0.8 pct to hit one-month high versus Swiss franc
* RBA minutes help Australian dollar to 4-month high
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 15 (Reuters) - The dollar climbed to a
one-month high against a basket of currencies on Tuesday, buoyed
by signs of progress on the U.S. negotiations aimed at averting
a default by the United States on its debt obligations.
The higher-yielding Australian and New Zealand dollars
rallied as well, partly on more encouraging fiscal headlines, as
investors increased their tolerance for risky currencies. The
Aussie dollar jumped to a four-month high versus the greenback,
while the New Zealand currency rose to a one-month peak.
The White house said on Tuesday it was encouraged by the
progress in Senate discussions on the debt ceiling, but the U.S.
government was far from completing a deal at this point.
Republicans in the U.S. House of Representatives, meanwhile,
failed to reach internal consensus on Tuesday on how to break an
impasse on the federal budget. But House Speaker John Boehner
said the lower chamber was determined not to allow a default.
Sean Cotton, vice president and foreign exchange adviser at
Bank of the West, in San Ramon, California, believes the
dollar's gains will be short-lived. Even if a last-minute debt
deal is hammered out, the root of the problem, the U.S. budget
conundrum, is just being postponed, he added.
In addition, he said, the "government shutdown is expected
to have hurt the U.S. economic recovery and has convinced many
that the Federal Reserve will have to extend its monetary
stimulus into next year." That should be negative for the
In early afternoon trading, the dollar index traded
up 0.4 percent at 80.608, after climbing to 80.703, its highest
since Sept. 18.
The dollar touched a two-week high against the yen at
98.70 yen, with gains at the session peak marking the 50
percent Fibonacci retracement of the move from the Sept. 11 peak
to the Oct. 8 low. It last traded at 98.56 yen, flat on the day.
The dollar rose to a one-month high against the safe-haven
Swiss franc of 0.9177 francs. It was last up 0.5 percent
at 0.9153 franc.
The dollar also rose against the euro, which failed to
benefit from a survey showing better-than-expected German
analyst and investor sentiment.
The euro fell 0.5 percent on the day and last traded
at $1.3496 after touching a two-week low of $1.3478 early in the
Overall, there was a hint of caution about any U.S. deal.
"In order for Congress to get to the finish line, both the
Senate and House have to sign the bill and with 2 days to go
before the U.S. reaches its borrowing limit, it is still not
clear if conservative House Republicans will support the bill,"
said Kathy Lien, managing director at BK Asset Management in New
Douglas Borthwick, managing director of Chapdelaine Foreign
Exchange in New York, believes that as a result of the
protracted talks on the U.S. debt ceiling, the United States
could be downgraded again.
"The fact that we're coming at the last minute upsets
holders of U.S. Treasuries," said Borthwick. "The holders of
U.S. Treasuries should not be in a position whereby they're
wondering a day or two before the deadline whether or not they
will be paid."
Ian Stannard, head of European FX strategy at Morgan Stanley
in London, said the prospect of U.S. central bank asset
purchases staying at current levels for longer could keep
higher-yielding currencies like the Australian dollar well
supported, potentially lifting it toward US$0.9660.
The Australian dollar's surge to a four-month high
against the greenback was helped by minutes of the last Reserve
Bank of Australia meeting, which showed no urgency to lower
The Australian dollar was last up 0.3 percent at US$0.9521,
while the New Zealand unit was flat at US$0.8362.