FOREX-Dollar rises off eight-month low after Yellen news
* Obama to nominate Yellen as Federal Reserve chief
* Focus remains on budget deadlock in Washington
* Minutes from Fed Sept policy meeting due 2:00 p.m. EDT
NEW YORK, Oct 9 (Reuters) - The dollar climbed further off a recent eight-month low against major currencies on Wednesday as news that Janet Yellen will be nominated as the next head of the U.S. Federal Reserve removed some uncertainty in financial markets.
The choice of Yellen, vice chairman of the Fed and widely perceived as a policy dove, has boosted expectations that the Fed will continue its asset-buying program, generally seen as dollar negative. Amid the uncertainty spurred by an ongoing budget impasse in Washington, the news brought some relief to investors.
President Barack Obama said he would not hold talks on ways to end the impasse while under threat from conservative Republicans but agreed to discuss anything, including his healthcare plan, if they restore government funding and raise the debt limit.
Hopes that lawmakers will eventually reach an agreement also helped the dollar, analysts said. Congress must come up with a deal by Oct. 17, when Treasury Secretary Jack Lew has said the government will run out of money to pay its bills.
"Call it dumb luck or coincidence but the announcement that President Obama would nominate current Federal Reserve Vice Chairwoman Janet Yellen to become the next Fed chairman has pushed the threat of US fiscal issues to the background," said Christopher Vecchio, currency analyst at DailyFX in New York.
The dollar index, which tracks the greenback against a basket of six currencies, rose 0.5 percent to 80.402, edging away from the 79.627 trough hit last Thursday, a low not seen since early February.
The euro fell 0.4 percent to $1.3515. Against the yen, the dollar rose 0.4 percent to 97.24 yen, moving away from a two-month low of 96.55 touched on Tuesday.
Jane Foley, senior currency strategist at Rabobank in London, said markets were wary that an eleventh-hour deal could drive the dollar higher, so no one wanted to be too short the currency.
"The Yellen news has cleared the air a bit. I think it is also just people not wanting to be on the wrong side of any dollar rally," Foley said. "There are expectations that as soon as there is a deal in Washington there will be a relief rally in the dollar, so people don't want to be too short of the dollar."
The current budget impasse and its effect on the economy appeared to validate the Fed's decision to remain cautious, likely even delaying plans to scale back its stimulus.
Later in the day, the Fed will release minutes from its policy meeting in September, when it shocked markets by deciding not to begin reducing its $85 billion a month bond-purchase program.
Signs of unease have started to emerge, such as investors' waning appetite for U.S. Treasury bills, which caused yields to rise to five-year highs. Some markets players said this could have lent the dollar marginal support.
News of Yellen's nomination fuelled risk sentiment and pressured traditional safe-haven currencies like the Swiss franc . The dollar rose 0.7 percent to 0.9099 Swiss franc.
Obama will announce his selection of Yellen later on Wednesday. If confirmed by the U.S. Senate, Yellen will replace Ben Bernanke, whose second term as Fed chairman ends on Jan. 31.
In other news, SWIFT, the member-owned service that connects banks, corporations and other financial-related institutional clients, said this week the Chinese renminbi is now the eighth most traded currency in the world, with a 1.49 percent market share in August 2013, up from 11th position and 0.92 percent market share in January 2012.
Renminbi trading value has increase 113 percent, overtaking the Swedish crown, the South Korean won and the Russian rouble, according to SWIFT.
But the Chinese currency fell to 12th ranking as a world payments currency in August 2013, with a market share of 0.84 percent, down from 0.87 percent in July 2013. The Thai baht moved up to the 11th spot.
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