* Dollar rises broadly, euro and yen all push lower
* Fed minutes shows most board members still expect tapering
* Dollar still vulnerable if no resolution found
By Anirban Nag
LONDON, Oct 10 The dollar rose on Thursday,
trading at its highest in two weeks against a basket of
currencies on signs Washington was moving towards breaking a
stalemate over debt and averting a possible U.S. default.
A rise in U.S. 10-year Treasury yields to 2.70
percent from 2.60 percent just a week ago was also helping. The
dollar index rose to 80.537, extending its recovery from
an eight-month low of 79.627 hit a week ago.
The euro was down 0.15 percent at $1.3506, extending
losses into a third session.
The U.S. currency received an additional boost after the
minutes of the Federal Reserve's September meeting revealed the
decision not to slow stimulus was a "close call" and that most
board members supported tapering bond-buying later this year.
While the latest fiscal problems are likely to see those
expectations of tapering fade, the minutes nonetheless offered
broad support to the dollar.
"There have been some positive developments regarding the
debt ceiling and while they may be short-term measures, they
offer some relief to the dollar," said Neil Mellor, currency
strategist at Bank of New York Mellon.
"The Fed minutes are also talking about tapering later this
year, all of which is nudging markets to cover positions before
House Republican leaders will visit the White House on
Thursday as the search for a way to break the impasse continues.
Some Republicans and Democrats floated the possibility of a
short-term increase in the debt limit to allow time for broader
negotiations on the budget.
"There are hopes that Washington is moving on the deadlock
over the government shutdown and debt ceiling. The dollar looks
set to gain if these problems are solved," said Sho Aoyama,
senior market analyst at Mizuho Securities.
Against the yen, the dollar rose 0.4 percent to
97.65, up from a two-month low of 96.55 yen hit on Tuesday.
One trigger for investor buying was the dollar's success
staying above its 200-day moving average in the past few days.
The average stood at 96.83 on Thursday.
Despite signs of rapprochement in Washington, the dollar
could still be vulnerable to concerns about a debt default.
Short-term U.S. government bill yields were at the highest level
since the 2008 financial crisis, reflecting investor anxiety.
Many investors are now looking to U.S. Treasury Secretary
Jack Lew's testimony before the Senate Finance Committee later
on Thursday on his latest estimate on the Treasury's funding
positions, as well as possible contingency plans.
Lew has said the Treasury will run out of additional
borrowing authority on Oct. 17.