U. S. dollar jumps to fresh high peak amid debt ceiling debate

The U. S. dollar has risen versus the Japanese yen to its biggest high since March 2020 as the Euro falls to lowest since early November.
The dollar index which measures the U.S. currency against a basket of six major currencies rose for the fourth consecutive day, to 94.37 from 93.77 on Tuesday, its highest since early November last year.
In the opening session, the dollar was last up by 0.4% at 94.115. It was also unfazed, even as U.S. Senate Republicans on Tuesday blocked a bid by President Joe Biden’s Democrats to head off a potentially crippling U.S. credit default, with federal funding due to expire on Thursday and borrowing authority on around 18 October.
The U.S. dollar surged on Wednesday to a fresh 10-1/2-month peak against rival currencies, boosted by increased expectations for a reduction in the U.S. Federal Reserve’s asset purchases by the end of the year and an interest rate hike, probably in late 2022.
The U. S. dollar also fared well despite a debate and a stalemate in Washington over the U.S. debt ceiling that threatened to force the government to shutdown.
The world’s largest reserve currency, seen as a safe haven bet at times of market stress, has strengthened in recent days as investors instead focus on fears of a global slowdown, a rise in energy prices and higher U.S. Treasury yields.
The euro was among the currencies to lose ground, falling to a nearly 11-month low of USD 1.1630. It last traded down 0.5% at USD 1.1631.
Traders are also concerned the Fed will start to withdraw policy support just as global growth slows. The yen showed little reaction to the election of Fumio Kishida as leader of Japan’s ruling Liberal Democratic Party that put him on course to become the country’s next prime minister.
The yen, the currency most sensitive to U.S. yields as higher rates can attract flows from Japan, touched an 18-month low against a resurgent dollar.
The dollar climbed to 111.68 yen, the highest since late March 2020. It was last little changed at 111.585 yen.
Currency traders are watching closely for clues as to when governments and central banks worldwide will reverse massive emergency support launched to fight the pandemic last year.