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FOREX-Dollar treads water, investors hopeful of U.S. debt deal

* Dollar index off two highs hit overnight as Republicans offer plan

* Yen pulls away from two-month high hit earlier this week

By Lisa Twaronite

TOKYO, Oct 11 (Reuters) - The dollar treaded water in early Asian trading on Friday, holding just below two-week highs against major currencies hit in the previous session on hopeful signals of progress toward averting a possible U.S. debt default.

House leaders were huddled in House Speaker John Boehner's office after presenting their plan for a short-term hike in the debt limit to avoid a potential default to President Barack Obama.

The New York Times later reported Obama had rejected the plan, but Republican Paul Ryan told reporters Obama had neither accepted or rejected the proposal.

The confusion caused a brief wobble in the dollar's progress.

"Although it is unclear whether the deal will be accepted by the White House and Senate Democrats given the strings attached, the biggest effect has been on market sentiment, with U.S. equity markets seeing the largest response," strategists at Barclays wrote in a report to clients.

The dollar index, which tracks the U.S. unit against a basket of six major counterparts, was last at 80.472, up about 0.1 percent.

It rose as high as 80.595 on Thursday, its highest since Sept. 26, though it remained not far off an eight-month low of 79.627 touched on Oct. 3.

The dollar was slightly up from late U.S. levels at 98.18 yen, well off a two-month low of 96.55 yen plumbed on Tuesday.

The euro was slightly higher at $1.3525.

Hopes raised by the Republican offer helped major U.S. stock indexes mark their biggest gains in more than nine months on Thursday, leaving the S&P 500 less than 2 percent away from its record closing high set three weeks ago.

The U.S. government was partially shut for a 10th day on Thursday. The fiscal standoff has heightened fears that the U.S. debt ceiling will not be raised by the Oct. 17 deadline, triggering a default on some short-term U.S. debt.

Two U.S. Federal Reserve officials with differing views on the central bank's policy agreed on Thursday that a U.S. debt default would have devastating effects.