Dollar sinks further on stalled US debt talks

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TOKYO: The dollar sank deeper to new three-week lows against the euro in Asia on Wednesday after tumbling in New York due to stalled talks on raising the US debt ceiling, dealers said.

The euro briefly topped $1.4530 to hit its highest level since early July before easing slightly to $1.4525 in Tokyo late morning trade.

The euro was changing hands at $1.4516 late Tuesday in New York where the single European currency had gained nearly one percent against the greenback.

Against the Japanese currency the euro traded at 113.15 yen against 113.00 in New York. The dollar bought 77.90 yen in Tokyo, compared with 77.94 yen in New York, at one point falling to a fresh four-month low of 77.82.

In Washington Republicans and Democrats remained deadlocked with the clock ticking towards the official make-or-break date for averting a possible debt default.

While markets expect lawmakers to eventually conjure a solution, the continued impasse raises the threat of the world's biggest economy running out of money to pay its bills and service debt on August 2.

Even if a default is averted, investors are concerned that the standoff may lead to a downgrade of the United States' top-notch credit rating.

Concerns are growing that a "US debt downgrade by a ratings agency may be inevitable" given the White House and US lawmakers would have to find a compromise, said Teppei Ino, senior analyst at Bank of Tokyo-Mitsubishi UFJ.

Some Republicans adamantly oppose any tax increases but maintaining the triple A rating would be difficult without a revenue increase, he told.

Later Wednesday the Federal Reserve is to release its Beige Book survey of US economic conditions while US durable goods orders for June are also out.

"But the focus remains squarely on whether US politicians reach a deal to slash the budget deficit and avoid a credit rating downgrade," National Australia Bank said in a note. (AFP)