* Signs of progress in Washington debt negotiation ease
* Market still cautious as deal yet to be sealed
* The proposed deal may be seen as stop-gap measure
* Dollar near 2-week high vs yen
By Hideyuki Sano
TOKYO, Oct 15 The dollar held firm on Tuesday,
hitting a two-week high against the yen as top U.S. senators
signalled they could soon reach a deal to reopen the U.S.
government and avert a possible debt default for the time being.
The dollar changed hands at 98.64 yen, having erased
losses since the start of week, staying near its highest level
in two weeks. It rose as high as 98.71 yen in early trade.
The dollar's index against a basket of currencies stood at
80.367 , having bounced back from Monday's low of
80.126 and keeping some distance from an eight-month low of
79.627 hit earlier this month, just after the U.S. government
entered a partial shutdown.
The euro was little changed at $1.3550, well within
recent trading band centering $1.35-1.36.
Senate Majority Leader Harry Reid said that he and his
Republican counterpart, Mitch McConnell, have made strong
progress toward reaching a deal.
Hopes that a deal could be reached before Oct. 17, when the
U.S. Treasury could technically be in default on its debts eased
Still, many uncertainties remain, given that any deal would
have to win approval in the House of Representatives, where
conservative Republicans pegged any continued government funding
to spending cuts.
The plan under discussion in the Senate is not particularly
inspiring to markets either, as it seeks only to raise the debt
ceiling through mid-February 2014 and to fund the government
operations to the middle of January.
"This is unlikely to lead to a sustainable rally in the
dollar and shares. U.S. policy makers are just kicking the can
and we will have another showdown in January. Under such
circumstances, it would be difficult for the Fed to reduce its
stimulus," said Masafumi Yamamoto, forex strategist at
Several Fed policymakers are due to speak later in the day,
including Chairman Ben Bernanke, who will speak via prerecorded
video at 0100 GMT.
Any hint that the Fed will delay tapering its bond buying
would reduce U.S. interest rates and thereby the yield on