FOREX-Dollar ticks higher on hopes of U.S. debt deal
* Yen pulls away from two-month high hit earlier this week
* Some dollar-buying seen ahead of Japanese holiday on Monday
* Dollar index approaches overnight highs as Republicans offer plan
By Lisa Twaronite
TOKYO, Oct 11 (Reuters) - The dollar edged up in Asian trading on Friday, holding just below two-week highs against major currencies hit the previous day and approaching this month's high against the yen on signs the U.S. budget impasse might be heading towards a resolution.
No deal emerged from a 90-minute meeting between President Barack Obama and Republican leaders, but talks continued into the night in an effort to reopen the government and avert a possible U.S. debt default.
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.
"We believe the U.S. government will get around the issue of debt ceiling and reach an agreement to avoid any potential non-payment. Rightfully the markets have also been calm thus far," strategists at Citigroup wrote in a report to clients.
The dollar was up 0.4 percent at 98.49 yen as of 0350 GMT, just below the day's high of 98.56 yen on the EBS trading platform.
That was its highest level since Oct. 1 and well above a two-month low of 96.55 yen plumbed on Tuesday. Support was said to lie at the 200-day moving average of 96.87 yen.
"Monday is a public holiday in Japan and some are reluctant to be dollar-short over the long weekend, in case a deal is reached then," said an analyst at a foreign exchange research firm in Tokyo.
Japanese Economics Minister Akira Amari said on Friday that if the current standoff was allowed to continue, the United States might default on its debt, and he urged politicians there to show some responsibility.
The dollar index, which tracks the U.S. unit against a basket of six major counterparts, was up slightly at 80.448.
It rose as high as 80.595 on Thursday, its highest since Sept. 26, but it remained not far off an eight-month low of 79.627 touched on Oct. 3.
The euro was also slightly higher at $1.3538.
Hopes raised by the Republican offer lifted investors' risk appetite and helped Asian shares hit three-week highs on Friday, after major U.S. stock indexes showed their biggest gains in more than nine months on Thursday.
The U.S. government was partially shut for a 10th day on Thursday.
The fiscal impasse and risk of a U.S. debt default have taken the spotlight off the Federal Reserve for now, but once the default danger passes, market participants will again be trying to work out when it will start reducing its stimulus.
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