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FOREX-Dollar extends gains vs yen on US debt deal

Published 07/31/2011, 10:09 PM
Updated 07/31/2011, 10:12 PM
CSGN
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* Dollar/yen and dollar/Swiss hit day's highs

* Aussie and kiwi climb, yen weakens broadly

* S&P futures and Asian shares rally (Updates prices)

By Masayuki Kitano

SINGAPORE, Aug 1 (Reuters) - The dollar surged roughly one percent against both the yen and Swiss franc on Monday, extending its bounce after U.S President Barack Obama announced that congressional leaders had reached an agreement to avert a debt default.

Commodity currencies climbed with the New Zealand dollar hitting a fresh post-float high against the U.S. dollar, adding to gains made earlier on growing hopes that American lawmakers were close to clinching a deal.

Against the Japanese currency, the dollar rose to as high as 78.051 yen , rising more than a full yen from an intraday low, and pulling away from a four-month low hit late last week.

"This is likely to spur some unwinding of the excessive yen buying positions that were built up," said Koji Fukaya, director of global foreign exchange research at Credit Suisse Securities in Tokyo.

"We could see the dollar head back up close to 80 yen, but after that its moves will hinge on forthcoming economic data," Fukaya said.

A key resistance zone for the dollar lies in the pivotal 78.60-70 area. Traders said only a break of the latter level would signal that an interim base was in place.

After trimming some gains, the dollar stood at 77.79 yen, up 1.4 percent on the day. The dollar had hit a four-month low of 76.70 yen on Friday on trading platform EBS, bringing it closer to a record low of 76.25 yen struck in March.

The yen came under broad pressure as a rally in U.S. stock futures and Asian shares supported risk appetite, with the euro rising 1.3 percent against the yen to 111.86 yen , and the Australian dollar climbing about 1 percent versus the Japanese currency to 85.93 yen .

In his announcement, Obama said the deal struck between Democrats and Republican leaders would cut fiscal spending by about $1 trillion over 10 years.

The dollar rose to as high as 0.7954 Swiss francs after Obama's announcement, climbing more than 1 percent on the day. It was last up 1 percent at 0.7935 francs , having rebounded from a record low near 0.7850 struck on Friday.

The New Zealand dollar hit a post-float high of $0.8842 . It last stood at $0.8835, for a gain of 0.4 percent from late U.S. trade on Friday. (Additional reporting by Hideyuki Sano in Tokyo, Ian Chua in Sydney, and Reuters FX analyst Krishna Kumar; Editing by Richard Borsuk)

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