The dollar is trader higher on Friday due to safe haven flows as focus remains on the fiscal cliff talks.
U. S policy makers in Washington D.C. only have four days left to reach a budget deal in order to avert the so-called fiscal cliff on January 1st, when new tax hikes and government spending cuts are slated to kick in. Such measures would push the economy back into a recession.
However negotiations have reached a gridlock since last week when House Speaker John Boehner canceled a vote on his “Plan B” proposal of introducing tax hikes for incomes above $1 million. Obama wants to increase taxes on incomes above $250,000.
After breaking for the Christmas holidays, the U.S, President cut short his holiday and returned from Hawaii to get back to talks on Capitol Hill.
However, pessimistic comments from Senate Democratic leader Harry Reid on Thursday warning that the “fiscal cliff” would not be avoided prompted a sell-off on U.S. stock markets and a rally in the dollar.
Congress will be convening this weekend to try reach a last-minute accord.