The dollar rose to a two-week high against major currencies on Thursday as optimism grew that lawmakers in Washington might reach a deal to avert a potential U.S. debt default.
House of Representatives Republicans said they would propose legislation for a short-term debt limit increase to avoid a U.S. debt default. House Speaker John Boehner said the short-term debt limit increase is conditioned on an offer by Democrats to start negotiations on fiscal issues.
The dollar had come under pressure and U.S. short-term borrowing costs had jumped early this week as a government shutdown as a result of budget disagreements dragged on and as fears intensified over whether Congress will raise the debt ceiling by the Oct. 17 deadline.
The dollar index, which measures the greenback against a basket of six major currencies, rose as high as 80.595, the strongest since Sept. 26, extending its recovery from an eight-month low of 79.627 hit last Thursday. It was last at 80.47, up 0.1 percent on the day.
The dollar rallied 0.9 percent to 98.21 yen, rebounding from a two-month low of 96.55 yen hit on Tuesday. Traders said the dollar rebounded after finding strong support at its 200-day moving average.
The euro was flat at $1.3523.
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