The U.S. dollar held near a two-month high on Wednesday on...

The U.S. dollar held near a two-month high on Wednesday on safe-haven demand as negotiations over raising the U.S. debt ceiling dragged on, while the kiwi dived 1% after New Zealand's central bank surprised markets by flagging an end to rate hikes.

The Reserve Bank of New Zealand raised interest rates by 25 basis points, as expected, to the highest in more than 14 years at 5.5% and its policy statement forecast that rate would prevail until June, 2024 - unchanged from the earlier forecast.

"The 25 points was expected, but the big surprise was leaving the OCR forecast unchanged," said Imre Speizer, head Of NZ strategy at Westpac.

"It says they're done (hiking) and the language in it kind of hints they're done. So that is a major surprise."

The New Zealand dollar NZD=D3 skidded to near three week low of $0.61700 after the decision. It was last down 1% at $0.61865. The Australian dollar AUD=D3 fell 0.24% to $0.659.

Meanwhile, the impasse in Washington over the debt ceiling negotiation has helped lift the dollar, even though it could lead to a default and push the country into recession, as investors reckoned thatcould spell worse trouble for the global economy.

The dollar index =USD , which measures the U.S. currency against six key rivals, was 103.46 in Asian hours, just under the 103.65 two-month peak it touched overnight. The index is up roughly 2% in May.

Treasury Secretary Janet Yellen has warned that the federal government could no longer have enough money to pay all its bills as soon as June 1, raising the risk of a damaging default.

Investors largely shunned riskier investments as another round of talks between the White House and the Republicans to raise the borrowing limit ended on Tuesday with no sign of progress.

"Progress on a deal is proving difficult and market jitters are increasing," said Harry Ottley, an economist at Commonwealth Bank of Australia.

Elsewhere, the yen JPY=EBS strengthened 0.14% to 138.37 per dollar, having touched a six-month low of 138.91 overnight, while sterling GBP=D3 was last trading at $1.2424, up 0.11% on the day.

Hawkish rhetoric from Federal Reserve officials has also buoyed the dollar, with traders anticipating interest rates to stay elevated for longer.

Markets are pricing in a 27% chance of a 25 basis point hike in June, CME FedWatch tool showed, after the Fed's quarter point increase earlier this month.

Investors will get more clues on policy from the minutes of the Fed’s May meeting, due later in the global day.

"We suspect the base case among the leadership of the committee is that the tightening cycle is probably over," said Kevin Cummins, chief economist at NatWest Markets.

"Recent rhetoric from a few officials seem interested in additional hike(s), and this sentiment may well have been reflected in the tone of the minutes."

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	Currency bid prices at 0110 GMT 

 Description	  RIC		 Last		   U.S. Close  Pct Change	 YTD Pct	 High Bid	Low Bid 
											  Previous				   Change				  
											  Session											
 Euro/Dollar	   EUR=EBS	$1.0772		$1.0771	 +0.02%		 +0.54%	  +1.0775	 +1.0769 
 Dollar/Yen		JPY=EBS	138.4300	   138.5900	-0.10%		 +5.50%	  +138.6300   +138.4500 
 Euro/Yen		 																			 
 Dollar/Swiss	  CHF=EBS	0.9010		 0.9016	  -0.06%		 -2.55%	  +0.9015	 +0.9010 
 Sterling/Dollar   GBP=D3	 1.2425		 1.2416	  +0.08%		 +2.74%	  +1.2429	 +1.2416 
 Dollar/Canadian   CAD=D3	 1.3498		 1.3503	  -0.03%		 -0.37%	  +1.3505	 +1.3497 
 Aussie/Dollar	 AUD=D3	 0.6609		 0.6611	  -0.02%		 -3.03%	  +0.6615	 +0.6609 
 NZ				NZD=D3	 0.6249		 0.6248	  +0.03%		 -1.57%	  +0.6255	 +0.6250 
 Dollar/Dollar																				   

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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