The dollar climbed on Wednesday, benefitting from its role as a safe haven despite the possibility of a US government default and as traders reduced expectations on immediate Federal Reserve rate cuts in response to strong US consumer spending data.

US President Joe Biden and Republican Congressman Kevin McCarthy have moved closer to a compromise to lift the US debt ceiling – but nothing has been finalized.

While Biden said that any default would land the economy in recession, investors fear the impact globally would be negative, and consequently see the greenback as a safe haven.

Against a basket of peers, including the euro, yen and sterling, the dollar index rose 0.3% to 102.96, to its highest since early April.

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

“A crushing blow to the world’s number one economy can only have negative shockwaves to the global economy, and reduce risk appetite, which would thus become a safe-haven event,” Rabobank strategist Jane Foley said.

Expectations for U.S. interest rate cuts any time soon were dampened by the solid increase in April consumer spending, and by comments from Fed officials.

Chicago Fed President Austan Goolsbee said it was “far too premature to be talking about rate cuts”, and Cleveland Fed President Loretta Mester said rates were not yet at a point where the central bank could hold steady, given stubborn inflation.

Interest rate futures pricing implies no chance of a rate cut in June, down from about a 17% chance seen a month ago.

“We expect some modest further increases in the dollar as markets continue to take out pricing for rate cuts,” said Commonwealth Bank of Australia strategist Joe Capurso. “A rate hike is possible this year, though the hurdle is high.”