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Mon 1 Aug 2011 10:00 AM

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Dollar extends gains versus yen on US debt deal

President Obama says US aims to cut fiscal spending by about $1 trillion over 10 years

Dollar extends gains versus yen on US debt deal

The dollar surged roughly one percent against both the
yen and Swiss franc on Monday, extending its bounce after US 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 US 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 US stock
futures SPc1 ESc1 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 US trade on
Friday.

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