NEW YORK (AP) -- The dollar hit a two-year high against the yen on expectations that Japan's new government will lower interest rates to boost the economy, weakening the yen.

The dollar rose as high as 86.136 Japanese yen, its highest point against the yen since Aug. 16, 2010. The dollar was worth 85.63 yen late Wednesday.

The euro was practically unchanged in afternoon trading at $1.3222 from $1.3220 late Wednesday as traders await developments from budget talks in Washington.

Traders are worried that lawmakers won't reach a deal in time to avoid a series of steep tax increases and government spending cuts that are set to kick in at the beginning of next year unless the White House and Congress agree on how to reduce the budget deficit.

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