The Australian dollar is higher as the greenback comes under pressure over the looming budget showdown in Washington.

At 0700 AEST on Thursday, the local unit was trading at 93.67 US cents, up from 93.60 cents on Wednesday.

US Republicans are calling for cuts to President Barack Obama’s healthcare package before they agree to raise the government’s borrowing limit.

Failure to reach a deal could force parts of the US government to be shut down.

BK Asset Management managing director Kathy Lien said the US dollar jitters over the negotiation was a factor in the greenback’s fall against all the major currencies.

“The fiscal showdown in Washington continues to be the leading story in the financial market,” she said.

“The debate will continue through the weekend as the House (of Representative) takes its time to draft an alternative bill and propose legislation that could increase the government’s borrowing limit.”

US Treasury Secretary Jack Lew said the American government would hit the debt ceiling no later than October 17th.

“If a deal is reached, it will most likely be at the eleventh hour and the consequence of no deal is high.”

Weekly jobless claims figures and pending US home sales for August will be released on Thursday night

AAP