Increased risk appetite chipped away at the dollar on Tuesday as investors become increasingly optimistic that the US 'fiscal cliff' be avoided.

Investors cheered reports that President Barack Obama and House Speaker John Boehner are making progress on a budget deal to avoid tax hikes and spending cuts due to take effect at the start of 2013.

The dollar index, which measures the US currency's performance against a basket of six others, declined to 79.348 from 79.556 on Monday.

Meanwhile the euro rose against the dollar for a seventh consecutive session on Tuesday as investors grow increasingly hopeful that progress is being made on US budget negotiations.

The single currency traded at a high of $1.3238 before later trading at around $1.3224 on Tuesday.

Demand for the single currency was also boosted after rating agency Standard & Poor's raised Greece's sovereign credit rating to B-minus with a stable outlook.

Against the yen, the greenback changed hands at ¥84.20 compared to ¥83.84 on Monday on hopes that the Bank of Japan will announce aggressive stimulus measures to bolster the Japanese economy.

Sterling traded at $1.6251 compared to $1.6201 as focus turned to minutes from the latest Monetary Policy Committee (MPC) meeting due out on Wednesday.

The MPC voted on December 6th to keep interest rates at 0.5% and maintain its current asset purchase programme at £375bn.



CJ

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