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Dollar up in Asia on rising risk sentiment

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(Globalpost/GlobalPost)

The dollar rose in Asia Thursday as President Barack Obama formally nominated fiscal dove Janet Yellen to head the Federal Reserve, while he also moved to hold talks with lawmakers in a bid to end a budget stand-off

In morning Tokyo trade, the greenback bought 97.62 yen, up from 97.37 yen in New York Wednesday, while the euro fetched $1.3504 compared with $1.3523, and 131.88 yen against 131.74 yen.

"Contrary to our expectations the US dollar has actually edged higher over recent days, shaking off some the pressure associated with the budget impasse in the US," Credit Agricole said. It added that the unit was "in a bottoming out process at present, with short term pain likely to give way to medium term gain".

Dealers welcomed Obama's choice of Yellen to take over Ben Bernanke at the Fed as she is a supporter of the bank's $85 billion-a-month bond-buying scheme, fuelling hopes it will be kept in place.

A continuation of the loose monetary policy would be expected to weigh on the dollar, but dealers viewed the news as a positive, boosting riskier assets.

Minutes from the Fed's most recent meeting showed a split among policymakers about when to start winding down the programme.

"The majority of participants still thought tapering could begin by the end of the year and be completed by mid 2014," National Australia Bank (NAB) said.

But the budget stand-off on Capitol Hill and concerns about how it will affect a recovery in the world's biggest economy could see a "prolonged" delay in tapering, NAB added.

Yellen's nomination restored a hint of normality to Washington, where a government shutdown approaches its 10th day with no sign of compromise -- raising fears of a catastrophic US debt default as an October 17 deadline looms.

Obama on Wednesday invited Republican and Democratic lawmakers to the White House to try to work through the impasse, which has attracted a chorus of criticism internationally, including from major US debt-holders China and Japan.

There are hopes the two sides will agree to a short-term increase in the debt ceiling in order to hold substantive talks on the budget.

The euro was mixed as traders wait for French and Italian industrial output later in the day while the European Central Bank publishes its monthly bulletin, which is expected to show it is still willing to launch further easing measures if necessary.

The Bank of England is also expected to hold fire on any new policy measures at a meeting later Thursday.

pb/dan

http://www.globalpost.com/dispatch/news/afp/131010/dollar-asia-rising-risk-sentiment