WASHINGTON - With a potential debt default looming, United States Senate leaders are close to a deal to stave off a self-inflicted political calamity that would shred US credibility and rock the global economy.
Signs of hope emerged on Monday, three days before a deadline to raise the US government's borrowing limit and as a partial federal-government shutdown enters its third week.
Senate Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell conducted low-key talks aimed at saving the day.
"I'm very optimistic we will reach an agreement that's reasonable in nature this week to reopen the government, pay the nation's bills and begin long-term negotiations to put our country on sound fiscal footing," Mr Reid said.
Mr McConnell added: "I share his optimism that we are going to get a result that will be acceptable to both sides."
Their comments were the strongest sign yet that Republicans and Democrats - in the Senate at least - want to end the damaging political crisis that has dented the country's international standing.
The Reid-McConnell effort is the last chance to reach a deal before the US Treasury exhausts its borrowing authority - but its success is far from assured.
Should the Democrat-led Senate coalesce on an agreement, the focus would then shift to whether Republican Speaker John Boehner can secure enough support from his conservative coalition in the House of Representatives to send it to President Barack Obama's desk.
At the conclusion of Monday's Senate session, Mr Reid said that "we are not there yet, but tremendous progress" has been made, in words that eased tension in the markets.
The Dow Jones Industrial Average closed 0.42 per cent higher at 15,301.26, while the broader S&P 500 rose 0.41 per cent to 1,710.14.
Asian markets broadly rose yesterday, with Tokyo, Hong Kong and Seoul all up in early trading.
"It's not like the US can't afford to pay its bills; it's more like its wife has just hidden its cheque book," said CLSA Asia-Pacific Markets equity strategist Nicholas Smith.
"Most fund managers appear to be more frightened of being left behind if the market rips, than of the apocalyptic scenario of failing to fix the debt ceiling on time," he told Dow Jones Newswires.