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Dollar static ahead of fiscal deadline

JIJI

The dollar moved narrowly in Tokyo trading Wednesday as traders retreated to the sidelines ahead of a Thursday deadline to avert a U.S. government default.

At 5 p.m., the dollar stood at ¥98.37-38, little changed from ¥98.40-41 at the same time Tuesday. The euro was at $1.3521-3521, down from $1.3558-3559, and at ¥133.01-04, down from ¥133.41-44.

In overnight New York trading, the dollar briefly fell under ¥98, due partly to a warning by Fitch Ratings of a possible downgrade of its AAA top rating on U.S. sovereign debt over the fiscal impasse.

In Tokyo in the morning, the greenback was lifted to levels around ¥98.60 by media reports that Democratic and Republican leaders in the U.S. Senate would announce within hours a deal to raise the federal debt ceiling and reopen the government.

But the dollar lost steam as the news turned sour before noon. In the afternoon, the U.S. currency was top-heavy around ¥98.50, with no more news about the U.S. fiscal deadlock.

The consensus remained that U.S. lawmakers will strike a last-minute deal to avoid a default, possibly lifting the dollar atop ¥99.

“Democrats and Republicans appear to be moving toward an accord, but traders won’t buy back the dollar aggressively unless a deal is announced,” an official at a foreign exchange margin trading service provider said.

The Senate was working on a draft agreement to raise the borrowing limit to allow the U.S. government to pay its bills until mid-February as well as enact a stopgap budget for the period through mid-January.

In the House, Republican hardliners were sticking to their demand for a fundamental rollback of President Barack Obama’s medical insurance reforms.