The dollar was firm on Wednesday, supported by a safety bid as...

The dollar was firm on Wednesday, supported by a safety bid as the U.S. hurtled toward its borrowing limit and boosted after solid economic data had traders trimming bets on imminent rate cuts.

The dollar hit a two-week peak of 136.69 yen JPY=EBS overnight and hovered just below that at 136.35 early in the Asia session. It also broke above its 50-day moving average against the euro EUR=EBS to trade at $1.0866 per euro.

President Joe Biden and top congressional Republican Kevin McCarthy have edged closer to a deal to avoid a U.S. debt default - but nothing is clinched yet and ironically the risk the U.S. fails to pay debts has put a bid under the currency.

"The dominance of the dollar in the global payments system provides a strong explanation as to why," Rabobank strategist Jane Foley said.

"A crushing blow to the world’s number one economy can only have negative shockwaves to the global economy, and reduce risk appetite, which would thus become a safe-haven event."

Rabobank forecast the euro falling to $1.06 in six months. Data showed Japan's economic growth, at an annualised 1.6%, markedly beat market expectations last quarter - perhaps lending some stability to the yen which was been falling as higher U.S. yields have supported the dollar.

Data showed U.S. consumer spending appeared to have increased solidly in April, which together with hawkish remarks from Federal Reserve officials weighed on bonds and against expectations that interest rate cuts are coming soon.

Chicago Fed President Austan Goolsbee said it was "far too premature to be talking about rate cuts", and Cleveland Fed President Loretta Mester said rates were not yet at a point where the central bank could hold steady, given stubborn inflation.

Two-year yields US2YT=RR rose seven basis points overnight to 4.12% and benchmark 10-year yields US10YT=RR rose 4 bps to 3.55%. Interest rate futures pricing implies no chance of a rate cut in June, down from about a 17% chance seen a month ago.

The Australian dollar AUD=D3 fell 0.7% and through its 50-day moving average and last held at $0.6659. Sterling GBP=D3 fell about 0.4% and last bought $1.2485.

"Market participants continue to lower pricing for near term rate cuts by the FOMC," said Commonwealth Bank of Australia strategist Joe Capurso.

"We expect some modest further increases in the dollar as markets continue to take out pricing for rate cuts. A rate hike is possible this year, though the hurdle is high."

The New Zealand dollar NZD=D3 was broadly steady at $0.6239, with investors looking ahead to a 25 bp interest rate next week and perhaps one more after that. 0#RBNZWATCH

"We see a 20% chance of a 50 bp hike and a 5% chance of a pause," analysts at ANZ Bank said. "Either could backfire by driving down future ... expectations."

European inflation data is also due, though little deviation from preliminary figures is expected. U.S. mortgage and housing starts data is published later in the day.

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	Currency bid prices at 0043 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS																	   

							  $1.0868		 $1.0862	+0.06%		  +1.43%	  +1.0869	 +1.0862 
																								 
 Dollar/Yen		JPY=EBS																	   

							  136.3550		136.3500   +0.06%		  +3.96%	  +136.4650   +136.4350 
																								 
 Euro/Yen		 
				  S>		  148.20		  148.15	 +0.03%		  +5.63%	  +148.2900   +148.0800 
																								 
 Dollar/Swiss	  CHF=EBS																	   

							  0.8960		  0.8966	 -0.05%		  -3.08%	  +0.8965	 +0.8960 
																								 
 Sterling/Dollar   GBP=D3																		

							  1.2486		  1.2487	 -0.01%		  +3.24%	  +1.2490	 +1.2481 
																								 
 Dollar/Canadian   CAD=D3																		

							  1.3474		  1.3479	 +0.01%		  -0.51%	  +1.3480	 +1.3480 
																								 
 Aussie/Dollar	 AUD=D3																		

							  0.6657		  0.6654	 +0.05%		  -2.34%	  +0.6661	 +0.6653 
																								 
 NZ				NZD=D3																		

 Dollar/Dollar				0.6239		  0.6231	 +0.13%		  -1.75%	  +0.6242	 +0.6228 
																								 
																								 
	 
All spots  FX=  
Tokyo spots  AFX=  Europe spots  EFX=   Volatilities  FXVOL=   Tokyo Forex market info from BOJ  TKYFX  
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World FX rates	https://tmsnrt.rs/2RBWI5E 

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