A month of combat in the US Congress over government spending showed signs on Monday of giving way to a Senate deal to reopen shuttered federal agencies and prevent an economically damaging default on federal debt.
The news led to an Asian rally in the share market which rose to their highest in nearly five months on Tuesday.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 per cent to its highest since May 23. Japan's Nikkei share average added 0.5 per cent, hitting a two-week peak as the market reopened after a holiday.
"The market is still precarious," said Takuya Takahashi, an analyst at Daiwa Securities. "Even if default can be avoided, investors are not ready to take risk at this point."
Several markets in the region were closed for holidays on Tuesday, including Singapore, Indonesia and India.
Senate Majority Leader Harry Reid, a Democrat, and his Republican counterpart, Mitch McConnell, ended a day of constant talks with optimistic proclamations, as details leaked out of the pact they were negotiating.
"We've made tremendous progress," Reid said at the end of a Senate session during a federal holiday, underscoring the urgency of settling a fiscal crisis that was nearing a Thursday deadline.
The US Treasury Department estimates it will reach a $16.7 trillion borrowing limit on October 17.
"We hope that with good fortune ... that perhaps tomorrow will be a bright day," Reid said, hinting at the possible Tuesday announcement of a bipartisan Senate deal.
McConnell, who has been a fierce critic of Reid all year instead had a smile on his face and upbeat words. "We've had a good day; had a good day yesterday," he said of his work with Reid.
The plan under discussion would promptly end a partial government shutdown about to enter its third week. It also would raise the debt ceiling by enough to cover the nation's borrowing needs at least through mid-February 2014, according to a source familiar with the negotiations.
Government operations would be funded through the middle of January, keeping in place the across-the-board "sequester" spending cuts that took effect in March, though government agencies would have more latitude to ease their impact. It would also set up a new round of budget talks that would try to strike a bargain by year's end.
With the Reid-McConnell talks continuing, these details were subject to change, according to Senate aides.
Democrats look to have fended off any major changes to President Barack Obama's signature health law, something that could fuel resistance, particularly by conservative Republicans in the House of Representatives who had insisted on delaying "Obamacare" as a condition of continued government funding.
House Majority Leader Eric Cantor told reporters that Republican lawmakers will hold a closed-door meeting on Tuesday "to discuss a way forward, so stayed tuned."
House Speaker John Boehner could face an insurrection that could threaten his position as Washington's top Republican if he tries to advance a bill over the objections of rank-and-file conservatives in that chamber.
Boehner has not publicly commented on the Senate negotiations. A spokesman said the House would review whatever the Senate passes.
In an early sign of Republican opposition, Representative Joe Barton of Texas told reporters: "No deal is better than a bad deal," as he downplayed the impact of an historic credit default if the US limit on borrowing is not quickly raised.
But Republican Representative Peter King of New York said it would be hard for the House not to put it to a vote if it gets strong support from Senate Republicans.
"For the (Senator) Cruz wing of the party who say we should get a better deal, I say we would have gotten a better deal if we had not shut the government down and gotten right to debt negotiations," said King, a moderate who has criticized the tactics of the conservative Tea Party faction.
Republicans have taken a hit in opinion polls since the standoff began and some in the party worry it could hurt their chances to win control of the Senate in next year's midterm elections.
Meanwhile, Sarah Palin, the former Alaska governor and 2008 Republican vice-presidential nominee, accused Obama of using war veterans as pawns in the two-week-old federal government shutdown.
Palin joined Ted Cruz and other conservative Republicans for a protest on Sunday which tore down barriers at a second world war memorial in Washington and confronted police outside the White House.
"We are here to honour our vets," she told a crowd at the national mall, which has been fenced off since October 1.
"You look around though and you see these barricades and you have to ask yourself is this any way that a commander in chief would show his respect, his gratitude to our military. This is a matter of shutdown priorities."
Obama could lift the barricades if he wished, she said, adding: "Our veterans should be above politics."-Reuters