* RBA minutes help Australian dollar to 4-month high
* Signs of progress in U.S. debt talks ease default fear
* FX market still cautious as deal yet to be sealed
By Jessica Mortimer
LONDON, Oct 15 The Australian dollar hit a
four-month high against the U.S. dollar on Tuesday, lifted by
Reserve Bank minutes showing policymakers in no hurry to cut
rates and optimism a U.S. deal to avert default would soon be
U.S. Senate Majority Leader Harry Reid, a Democrat said
after a day of talks on Monday with his Republican counterpart,
Mitch McConnell that they had made "tremendous progress" and
suggested a deal could come as early as Tuesday.
The comments raised expectations final agreement could be
reached before a Thursday deadline to raise the U.S. debt
ceiling and boosted riskier currencies such as the Aussie.
Moves in most major currencies were modest, however, as
investors remained wary of further political bickering.
The Australian dollar rose 0.6 percent to $0.9547,
its strongest since mid-June, after minutes showed no urgency to
lower borrowing costs, while policymakers did not seem overly
concerned by the currency's recent rise.
"The main trigger for the move in the Australian dollar was
the minutes, which were slightly on the hawkish side," said
Richard Falkenhall, currency strategist at SEB.
The euro held steady at $1.3561, within its
recent $1.35 to $1.36 trading range.
The dollar dropped 0.2 percent to 98.35 yen, having
earlier hit a two-week high of 98.71 yen. However. it remained
well above a two-month low of 96.55 yen hit a week ago.
"If we get some kind of temporary resolution in the U.S. it
will have a small positive short-term impact on the dollar. But
in the medium term this is clearly dollar negative," SEB's
The dollar index against a basket of currencies stood at
80.31 , off Monday's low of 80.126 and above an
eight-month low of 79.627 hit earlier this month, just after the
U.S. government entered a partial shutdown.
Many uncertainties remain, however. The plan under
discussion in the Senate seeks only to raise the debt ceiling
through mid-February 2014 and to fund government operations to
the middle of January.
"This is unlikely to lead to a sustainable rally in the
dollar and shares," said Masafumi Yamamoto, forex strategist at
Praevidentia Strategy in Tokyo. "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."