Markets were eerily quiet in Asia as trade resumed on Wednesday with investors anxiously waiting to see if the U.S. Congress could strike a last-minute deal to avoid triggering tax rises and spending cuts that could threaten the global economy.
The U.S. Senate early on Tuesday passed a bill that aims to avoid the "fiscal cliff" of $600 billion in automatic spending cuts and tax increases.
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However, the package immediately ran into opposition from House Republicans, who were meeting to decide whether to reject or amend the bill .
"Frankly, we don't know what to make of it all. It's like a circus there," said one exasperated forex dealer at an Australian bank in Sydney.
"The markets have always assumed they would eventually strike a deal that would avoid the worst affects of the fiscal cliff, but it's getting harder and harder to stay optimistic."
He suspected equity markets would be on the defensive as they opened, with safe-haven bonds in demand. Getting a read on trends was tricky as U.S. Treasuries and stock futures were yet to trade, while Tokyo was off on holiday.
Currencies were trading, but the only major move was further weakness in the Japanese yen as investors wagered the Bank of Japan would have to take ever more aggressive easing steps to support the economy and satisfy the new government.
The dollar held firm on the yen at 86.75 yen, having touched its highest level since August 2010. The Japanese currency also dropped to depths not seen in over four years against the Australian and New Zealand dollars.
The euro was a shade firmer against the U.S. dollar at $1.3216, but turnover was extremely thin.
Spot gold was little changed at $1,674 an ounce, while oil futures dipped 20 cents to $91.62.
(Reporting by Wayne Cole; Editing by Eric Meijer)