FOREX-Dollar hovers near 8-month lows as U.S. debt fears persist
* Obama to Boehner: can talk once default threat removed * Dollar edges higher against yen but remains on defensive * Fed to release meeting minutes on Wednesday By Wanfeng Zhou NEW YORK, Oct 8 (Reuters) - The dollar hovered near its recent eight-month low against major currencies on Tuesday as U.S. lawmakers struggled to find a solution to the country's budget and debt problems that could potentially lead to a default. Against the yen, the dollar edged higher from a two-month low although it gave up some of the gains. Analysts said the U.S. currency will likely stay under selling pressure as long as the standoff in Washington is unresolved. The dollar index, which measures the U.S. currency's value against a basket of currencies, was little changed at 79.977. It hit an eight-month low of 79.627 last Thursday. "With the U.S. government still shuttered, traders and investors are unwilling to push the market too heavy in either direction," said Scott Smith, market analyst at Cambridge Mercantile Group in Calgary, Alberta. President Barack Obama told Republican Speaker of the House of Representatives John Boehner on Tuesday he would be willing to negotiate with Republicans once the U.S. government is re-opened and the threat of a default is lifted, the White House said. Republican House Speaker John Boehner renewed calls to President Barack Obama to have a conversation with his party at a press conference on Tuesday morning. Boehner, flanked by Republican leadership, said "there is no line in the sand" drawn by his party over fiscal negotiations. With the partial U.S. government shutdown in its second week and only nine days left for Congress to raise the U.S. debt ceiling, Obama said he would accept a short-term increase to avoid a default. Congress must reach a deal by Oct. 17, when Treasury Secretary Jack Lew has said the government will run out of money to pay its bills. "There are a few signs of willingness from the White House and Congress to open up to more constructive discussions, which supports the view that some kind of deal will be reached and has calmed investors' fears," said Niels Christensen, currency strategist at Nordea. But he added: "The risk is to the downside for the dollar as long as we don't have an agreement ... There may be some more euro buying if it goes above last week's high." The dollar rose 0.2 percent to 96.90 yen, having dropped to 96.55 yen in Asian trade, its lowest since Aug. 12. It then recovered to trade back above chart support at 96.72 yen, its 200-day moving average. The euro was little changed at $1.3575, pulling away from an eight-month high of $1.3645 touched on Thursday. It showed little reaction to data which showed German industry orders unexpectedly fell in August although the trend was still for growth. Fears of a U.S. default drove interest rates on U.S. one-month government debt to their highest levels since August 2011. The International Monetary Fund said a U.S. debt default is an unlikely event, but one that could have catastrophic consequences for the world. China and Japan, the United States' biggest creditors, are increasingly worried the U.S. government shutdown and standoff over the debt ceiling could wreak havoc on their trillions of dollars of investments in U.S. Treasury bonds. The impasse has distracted investors from what had previously been their main preoccupation: the timing of the U.S. Federal Reserve's reduction of its stimulus, which should lift the dollar. On Wednesday, the Fed will release minutes from its policy meeting last month, when it shocked markets by deciding not to begin reducing its $85 billion a month bond-purchase program. The higher-yielding and riskier Australian dollar rose after upbeat surveys on Australian employment and business confidence. It last traded up 0.1 percent at $0.9441, paring gains as stocks came under pressure and risk appetite decreased.
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