The dollar rose on Wednesday, benefiting from its safe-haven status amid risks of a US debt default, as traders cut bets on imminent Federal Reserve rate cuts after strong data on US consumer spending.

US President Joe Biden and senior congressman, Republican Kevin McCarthy, are close to reaching an agreement to raise the US debt ceiling – but nothing has been finalized yet.

While Biden has said a default would send the economy into a recession, investors fear the impact could be negative globally, which is why they view the dollar as a safe haven.

The dollar index rose 0.3 percent to 102.96 against a basket of peer currencies including the euro, yen and pound sterling, its highest level since early April.

It rose 0.4% against the yen to a two-week high of 136.99 and 0.5% against the British pound to $1.2422, its highest against the British currency since April 26.

“The crushing blow to the number one economy in the world can only send negative shock waves to the global economy and reduce risk appetite, making it a safe event,” said Jane Foley, Rabobank strategist.

Expectations for near-term US interest rate cuts were dampened by a strong rise in consumer spending in April and comments from Federal Reserve officials.

“It’s too early to talk about interest rate cuts,” said Austin Goolsby, president of the Federal Reserve Bank of Chicago, and Loretta Mester, chair of the Cleveland Fed, said interest rates had not yet reached the point where the central bank could maintain interest rates. Interest due to constant inflation.

There is no chance of a rate cut in June, compared to 17% a month ago, according to interest rate forwards.

“We expect further modest gains for the dollar as markets continue to cut rates,” said Joe Capurso, strategist at Commonwealth Bank of Australia. A rate hike this year is possible, but the threshold is high.

The New Zealand dollar remained broadly flat at $0.6232, as investors looked to a 25 basis point rate hike next week and possibly again after that.

“We see a 20% chance of a 50 basis point increase and a 5% chance of a halt,” said analysts at ANZ Bank. “Both can backfire by lowering… expectations for the future.

The euro fell 0.3 percent to a six-week low against the dollar at $1.0831.

European inflation data is expected at 0900 GMT, but a slight deviation from the preliminary numbers is expected.

The Turkish lira, which has been under pressure since the election results, left open the possibility of President Recep Tayyip Erdogan extending his rule – and his unorthodox economic policies – to a 10-week low of $19.75 per dollar.

The Thai baht, which initially rose on strong election results from progressive parties, fell 0.5% as politicians began what could be a long period of negotiations until forming a government.