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Dollar higher after Obama, GOP make tax deal

NEW YORK — The dollar kept gaining against yen and edged higher versus the euro Wednesday in the aftermath of a tax package that, if passed, could boost the U.S. economy.

Republican leaders and the White House made a deal extending tax cuts on all income groups for two years while also extending unemployment benefits. The deal includes a new payroll tax cut for employees and a credit for businesses.

The dollar rose as investors sold Treasury bonds, driving up yields on government debt. Rising yields on U.S. bonds make the dollar, which investors use to buy bonds, a more attractive bet for traders.

Investors tend to sell bonds and buy stocks when they feel that a growing economy will cause inflation to ramp up. They also sell bonds because of worries about a growing deficit. The tax deal would add to the deficit.

The euro dropped to $1.3261 from $1.3284 late Tuesday as stresses over European debt levels continued. In Brussels on Tuesday, European leaders insisted their rescue fund had enough money to handle the continent’s government debt crisis.

Officials conceded, however, that stress tests of European banks conducted earlier this year were not tough enough and that Greece would need more time to repay its bailout loans. The euro has tumbled more than 8 percent since early November because of worries about the debts of European countries and the ability of those countries to fund their governments through the bond markets.

In other trading, the British pound rose to $1.5802 from $1.5769 and the dollar climbed to 84.07 Japanese yen from 83.46 yen. The U.S. currency edged up to 1.0105 Canadian dollars from 1.0094 Canadian dollars but dipped to 0.9868 Swiss francs from 0.9873 Swiss francs.