The U.S. dollar edged higher on Friday amid increased optimism over the ongoing debt ceiling talks. Democratic negotiators and Republican House Speaker Kevin McCarthy have both confirmed that they are making steady progress in reaching a deal to raise the U.S. government’s $31.4 trillion debt ceiling so as to avoid a detrimental default.
The dollar rose to a near six-month peak against the yen, costing 138.47 yen during early trading. The greenback also rose to a seven-week high against the euro, the latter of which now stands at $1.0760. The sterling edged 0.1% lower to $1.2396.
Following the latest developments in the debt ceiling discussions, the Federal Reserve seems to have a clearer path forward with regard to its interest rate policy.
“Optimism about the debt ceiling (talks) has contributed to a repricing for the Fed … the fact that (a deal) would remove a big weight on the economy, effectively,” Ray Attrill, head of FX strategy at National Australia Bank explained. “It does remove one obstacle to the Fed continuing to raise rates,” Attrill added, with the continuation of the Fed’s interest rate hikes now appearing increasingly likely.