* Obama to choose Yellen for top Fed job
* Focus remains on budget deadlock in Washington
* Minutes of Fed's Sept policy meeting due at 2 p.m. (1800
By Wanfeng Zhou
NEW YORK, Oct 9 The dollar rose on Wednesday
from an eight-month low against major currencies as news that
Federal Reserve Vice Chair Janet Yellen will be nominated as the
next chief of the U.S. central bank removed some uncertainty in
Yellen is seen as a dove, which will boost expectations that
the Fed will continue its asset-buying program, seen as dollar
negative. However, the news brought some relief to investors who
have been on edge because of the budget deadlock in Washington.
President Barack Obama said he would not hold talks on ways
to end the fiscal 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.
"What the market is trying to do is look through the
rhetoric and it appears that both sides behind closed doors
might be coming up with some kind of a face-saving deal. That's
another reason why the dollar is rallying," said Boris
Schlossberg, managing director of FX Strategy at BK Asset
Management in New York.
The dollar index, which measures the greenback versus
a basket of six currencies, rose 0.4 percent to 80.378, edging
away from the 79.627 trough hit last Thursday, a low not seen
since early February.
The euro fell 0.4 percent to $1.3517. Against the
yen, the dollar rose 0.3 percent to 97.19 yen, moving
away from a two-month low of 96.55 touched on Tuesday.
Jane Foley, senior currency strategist at Rabobank, 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 and
probably even delay plans to trim its stimulus.
Later in the day, 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
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 0.9098 Swiss franc.
Obama will announce his selection of Yellen later on
Wednesday. If confirmed by the U.S. Senate, Yellen would replace
Ben Bernanke, whose term ends on Jan. 31.