TOKYO - The dollar rose in Asia Wednesday on cautious optimism that warring US lawmakers will reach a last-minute deal to resolve a budget impasse which threatens to spark a catastrophic default.
The greenback bought 98.51 yen (S$1.24) in Tokyo midday trade, up from 98.16 yen in New York Tuesday afternoon.
The euro was mixed at US$1.3514 (S$1.68) and 133.16 yen, compared with US$1.3525 and 132.77 yen in US trading.
Despite the dollar's resilience, the unit was likely to face selling pressure as the latest efforts to end the two-week US budget impasse fell apart late Tuesday.
The Republican leadership failed to muster enough support for its own plans to avert default, with just over a day to raise the debt ceiling by the October 17 deadline.
Fitch ratings agency said it may downgrade Washington's AAA credit rating, while the US Treasury has warned that if Congress fails to lift the US$17.6 trillion debt ceiling by Thursday, it will lose its ability to borrow and could run out of cash to meet all its obligations.
"Tension is building up as we approach this deadline, and talks of hope and progress, rather than concrete deals, might not be enough to keep sentiment from deteriorating," Credit Agricole said.
"The dollar remains driven by the political uncertainty in Washington, especially against a backdrop of limited to no macro data."
Dealers said the US government's budget situation and its potential impact on the global economy meant the US Federal Reserve was likely to delay tapering its US$85 billion-a-month bond buying programme - a move that could weigh on the dollar.
Investors will be looking to the Fed's Beige Book later in the day to gauge conditions in the world's biggest economy.
An annual reception of the European Central Bank was likely to see officials hinting again they might launch further monetary easing measures, dealers said.