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Dollar set for weekly gain amid optimism on debt deal

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The dollar rose against a basket of major currencies on Friday, heading for its first weekly gain in five, as optimism grew that the U.S. Congress will reach agreement on a stop-gap deal to avert a devastating U.S. default.

President Barack Obama and congressional Republican leaders moved to end their fiscal impasse on Friday but struggled with the details for a short-term reopening of the federal government and an increase in the U.S. borrowing limit.

With no certainty that a deal will be struck to raise the limit by the Oct. 17 deadline, analysts said, the dollar will remain pressured while safe-haven currencies such as the yen will be attractive. Worries about the U.S. budget and debt crisis had driven the dollar index to an eight-month low last Thursday.

The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.1 percent to 80.38. It is on pace for a gain of 0.4 percent this week, the first weekly rise since early September.

The dollar rose 0.3 percent to 98.47 yen, having hit a session peak of 98.57 yen, according to Reuters data, the highest since Oct. 1. Support is seen at the 200-day moving average of 96.87 yen.

The euro rose 0.12 percent to $1.3551.

The dollar rose 1.1 percent against the yen for the week, its best week since August 23, while the euro slid 0.2 percent against the dollar, its worst week since September 6.

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