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Dollar inches higher; US budget standoff limits advance

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The dollar notched broad gains on Thursday, recouping losses from the previous session, after stronger-than-expected U.S. weekly jobless claims data supported market expectations for a wind-down of the Federal Reserve's bond-buying stimulus program.

The dollar's upside, however, should be limited in the near term as worries about a potential U.S. government shutdown and the possibility of a default are keeping investors cautious.

U.S. House of Representatives Republicans refused to give in to President Barack Obama's demands for straightforward bills keeping the government running beyond Sept. 30. House Republicans also challenged Obama on the debt ceiling increase, the amount the government is allowed to borrow, that the Treasury Department says is urgently needed by Oct. 17.

The U.S. currency rose against the euro, which itself was hurt by renewed political tensions in Italy. The pair traded under $1.35, down 0.2 percent on the day.

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The dollar index rose 0.2 percent to 80.50, after slipping 0.3 percent on Wednesday toward a 7-month trough of 80.060 plumbed on Sept. 18. On that day, the U.S. Federal Reserve stunned markets by maintaining its massive stimulus program when it had been widely expected to begin tapering its asset purchases.

Against the yen, the dollar held near 99 yen on the EBS trading platform, off a one-week low of 98.27 yen touched in the morning. The euro was flat near 133 yen.

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