The dollar strengthened against most currencies Tuesday on risk aversion in the absence of a resolution of the debt-ceiling impasse, but it fell against the yen after a Japanese minister warned about the effect from a currency that is too weak. The ICE dollar index , which measures the greenback against a basket of six major global currencies, climbed to 79.531 from 79.460 in North America late on Monday. The euro slipped to $1.3360 from $1.3386. “At this stage, it looks like the debt-ceiling talks could erupt into another war between Republicans and Democrats that leaves the U.S. economy and the financial markets caught in the middle," said Kathy Lien, managing director at BK Asset Management. The debt ceiling refers to the amount the U.S. government can borrow, and unless politicians agree to raise the limit, Washington could potentially run out of money to pay its bills. “In the coming weeks, politics will have a growing impact on currency flows," she added. Meanwhile, the Japanese yen climbed against major currencies, retracing some of the ground it lost recently, after Japanese Economy Minister Akira Amari said at a news conference Tuesday that a yen that is too weak wasn't good for the economy, according to a Dow Jones Newswires report. He reportedly added that local firms must be resilient enough to overcome some foreign-exchange-related disadvantages. The U.S. dollar fell to 88.96 yen from ¥89.46, while the euro dropped to ¥118.82 from ¥119.50. Despite the day's losses, the dollar is up 6.5% and the euro's up 8.1%, against the yen from a month ago. “[Amari's] comments were initially reported early in the North American session, with no impact. Rehashed comments during the Asian time zone created much more of a stir," said Sue Trinh, a senior currency strategist at RBC Capital Markets. Among other major currency pairs, the British pound was changing hands for $1.6071 versus $1.6078, while the Australian dollar was fetching $1.0546 against $1.0564. Marketwatch
