Major U.S. stock indexes traded lower on Tuesday, extending losses throughout the session, as debt limit talks stretched further to the brink after further talks between the White House and Republican negotiators made little progress. The Nasdaq fell 160 points 1.26 percent as a risk-off tone and tightening economic conditions hit growth stocks in particular.The positive economic release from the preliminary PMI (though not the top tier) and the rise in new home sales are firmly in the context of the debt ceiling elephant, which looks set to be the main drivers of risk sentiment until a deal is reached, the two sides of US politics seem far apart in this regard, and risk sentiment looks shaky, at least in the short term.Foreign exchange marketThe dollar rose on Tuesday as the risk-off tone in U.S. equities helped the dollar index hit a high of 103.65 to test resistance from last week's high. Intraday yields were lower, trimming earlier strength, which did limit gains, and the lack of a Fed speaker failed to provide any other catalyst.The yen managed to buck the trend, gaining slightly against the dollar. The dollar rose to 138.91 yen early in the session before hitting resistance, with the yen gaining support as a safe haven as the risk tone worsened, also helped by US Treasury yields moving lower throughout the afternoon.NZD and AUD weakened on the risk tone, with AUD/USD trading at 0.6600 from a high of 0.6661 as risk sentiment remained bearish, with weakness in iron ore and copper also hampering the Aussie. A key risk on Wednesday is the RBNZ interest rate decision, which is expected to raise rates by another 25 basis points, but futures pricing in a 50 basis point hike is highly likely and NZD should see some volatility.In today's economic announcements, the main risk event will be the RBNZ rate announcement at 12:00 PM AEST. This will be an interesting decision, as the market is fully pricing in a 25 basis point hike, and about 40 percent above a 50 basis point hike. The recent announcement of massive spending measures in New Zealand that are seen as inflationary in the budget will certainly allow the RBNZ to press ahead with its rate tightening cycle, the question is whether they will surprise or please the market with another super-50, either 25, either way, as the market reprices, The NZD will certainly be volatile at this time and the chart to watch is AUD/NZD, which is currently priced to put it right in the historical buy zone and the "doves" 25 should see good mean-reversion trade opportunities.