The dollar rose against most currencies Monday in thin trading and held its gains even after President Barack Obama said a deal was in sight to avert a fiscal disaster that would have meant tax hikes and spending cuts for the world's largest economy.
The dollar could come under pressure if a compromise agreement on the U.S. budget encourages investors to buy riskier assets, driving flows away from the safe-haven and highly liquid greenback.
Obama said Monday, the deadline before the U.S. economy goes over the "fiscal cliff," a deal on the budget was within sight but was not complete yet.
His comments bolstered riskier currencies such as the Australian, New Zealand, and Canadian dollars.
"Even though, it's not definitive yet, overall it is hopeful," said Nick Bennenbroek, head of New York FX strategy, at Wells Fargo in New York.
"So long as Obama's statements are consistent with the idea that we are getting a deal, that is going to keep the market relatively calm. That should be positive for foreign currencies because of risk appetite and negative for the dollar as a safe-haven."