Dollar up against yen on hopes for US debt talks

TOKYO–The dollar rose against the yen in Asia Friday on optimism that talks between President Barack Obama and Republicans will end in a deal to raise the US debt ceiling before the government runs out of money.

In Tokyo midday trade, the greenback fetched 98.49 yen, up from 97.91 yen in New York late Tuesday.

The euro edged up to $1.3538 and 133.34 yen from $1.3526 and 132.58 yen.

Investors are increasingly hopeful of a breakthrough after Obama and Republican leaders held their first talks on resolving a budget impasse since a government shutdown on October 1.

Economists warn that if the debt ceiling is not raised before the government runs out of cash on October 17 it will default, which would likely spark another global recession.

Slow progress on the ending the crisis — with less than a week before Washington runs out of cash to pay its bills — had led dealers out of the dollar and into the safety of the yen.

However, a Republican offer to raise the borrowing limit for six weeks while a budget deal was hammered out boosted dollar sentiment.

“It appears that politicians are inching closer to a temporary resolution, which is helping relieve uncertainty and concerns about a US default,” Credit Agricole said.

“The important takeaway is that a stronger dollar tone is a reflection of the reduced policy uncertainty (monetary and fiscal), which is likely to support a moderate short-term bounce in the dollar”.

Japan’s economy minister Akira Amari added his voice to a growing chorus of international leaders calling for Washington bring an end to the crisis.

“As the largest economy in the world, the US has a responsibility not only to its people, but also to the rest of the world,” Amari told reporters in Tokyo on Friday.

Underscoring fears about US budget woes, Japanese investors sold nearly $23 billion worth of foreign bonds over the past week, a record that dealers said was likely linked to fears about a fiscal collapse in Washington.

“There were many who were worried about the default risk,” an options dealer at a major Japanese bank told Dow Jones Newswires.

However the government shutdown has delayed the release of key US economic data, including last Friday’s key non-farm payroll figures.

That has thrown into question the Federal Reserve’s timetable for scaling back its monetary easing scheme, which hinges on signs of a firm US recovery.