21.01.201820:33:00UTC+00Euro Advances, Dollar Stable Amid Political Developments

The euro rose on optimism that Germany's Angela Merkel has progressed in the coalition talks after months of stalemate, while the dollar rebounded from earlier lows as the government shutdown ensues.

Germany's centre-left Social Democrats have voted to engage in coalition talks with Merkel's conservatives, CDU/CSU, bolstering the euro. The common currency traded at $1.2255 at $7:1 HK/SIN after rising as high as $1.2274 earlier, following the positive outcome of the weekend party vote.

The dollar edged up with the House and Senate holding session in Sunday amid a budget-bill deadlock in Congress. It traded against the yen down at 110.60, against the levels around 111 observed on Friday.

Stock markets have mostly dismissed the uncertainty surrounding the issue of federal government shutdown as bets on widening global economic expansion and the profit growth drove up equities to record level highs this month. Statements from policy makers after the central bank decisions in Europe and Japan this week may be the next catalyst for a jump in government bond yields that been triggered by indications that unprecedented stimulus would soon be curbed.

Forex traders are also monitoring China's appetite for currency strength as the yuan rises above the psychologically significant level of 6.4 per dollar for the first time since December 2015. Futures on equity gauges in Asian markets also pointed to a higher open when trading starts.