WASHINGTON (MNI) – The following is a roundup of key developments
and events Tuesday on the ongoing stand-off over the U.S. debt ceiling:

* The dollar retained a soft tone through European morning
trade Wednesday, following on from Tuesday night’s decision to postpone
the vote on House Speaker John Boehner’s debt plan. The dollar, however,
was able to hold off its worst levels ahead of the New York open as both
dollar-Swiss and dollar-yen met decent demand at their respective lows.

* In Asia hours Wednesday, U.S. debt ceiling talks continued to
gnaw away at market confidence in the U.S. dollar as the August 2
deadline approached. The dollar took another hit, holding near session
lows against the euro and the yen in late trade, as the standoff
continued, with no sign of any major breakthrough. The dollar was also
hit by a sharp rise in the Australian and New Zealand currencies
Wednesday, after they jumped to the highest levels since they were
freely floated, on a combination of strong data and the lingering U.S.
debt worries.

* Key Asian stock markets fell on Wednesday as the ongoing debt
limit standoff in Washington weighed on regional sentiment, while Tokyo
was hit by associated yen strength and share prices fell in Sydney after
inflation data surprised on the upside.

* Japanese government bonds ended Wednesday’s session higher
across the board, boosted by lower domestic stocks and the continued yen
strength. However, traders said overall volumes were muted, with a lack
of domestic news flow and continued uncertainty over the U.S. debt limit
talks keeping many players sidelined.

* The plan of House Speaker John Boehner to quickly pass a new
House Republican debt ceiling plan unraveled Tuesday after the
Congressional Budget Office released a cost estimate that showed the
bill falls well short of its goal of $1 trillion in savings. The CBO
estimate said the Boehner bill would save about $850 billion not the $1
trillion that Boehner said is needed to pass a debt ceiling increase of
that same size.The CBO score was an embarrassing blow to Boehner’s hope
to pass a debt hike bill quickly through the House. If he goes forward
with the House vote this week, it would likely be Thursday or Friday,
almost on the eve of the Aug. 2 deadline.

* In a letter to House Speaker John Boehner Tuesday, the
Congressional Budget Office estimated that his proposed legislation
would reduce budget deficits by about $850 billion between 2012 and 2021
relative to CBO’s March 2011 baseline adjusted for subsequent
appropriation action. The CBO also calculated the net budgetary impact
if discretionary savings are measured relative to its January baseline
projections. Relative to that baseline, CBO estimates that the
legislation would reduce budget deficits by about $1.1 trillion between
2012 and 2021.

* Senate Majority Leader Harry Reid and Senate Minority Leader
Mitch McConnell exchanged sharp barbs Tuesday on the merits of competing
debt ceiling plans, but both said they are open to further compromises
to end the debt ceiling stalemate. In back to back briefings after
Senate policy lunches, Reid and McConnell said the debt ceiling impasse
must be resolved soon.

–Editor: Brai Odion-Esene; besene@marketnews.com

** Market News International Washington Bureau: 202-371-2121 **

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