FOREX-Euro touches 6-1/2 month peak vs yen, cuts losses vs dollar

Wed Nov 21, 2012 12:05pm EST

Related Topics

* Prospects for Greek aid deal limits euro losses
    * Lenders to meet again next Monday to seek agreement
    * Dollar hits 7-1/2 month high vs yen, breaks above 82 yen
    * Euro crosses 105 yen for first time since early May

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 21 (Reuters) - The euro hit its highest in
more than six months against the yen and trimmed losses versus
the dollar in choppy trading on Wednesday as comments by
Germany's chancellor spurred optimism European leaders will
reach an agreement on Greek funding.
    Europe's common currency dropped earlier after Greece's
international lenders failed to reach agreement on releasing
emergency aid as they haggled over how to reduce the country's
debt to a sustainable level. 
     The euro later trimmed losses after German Chancellor
Angela Merkel said she saw chances of a deal at a meeting of
European finance ministers on Monday. 
    "Perhaps the most important take-away from the failed talks
was that it appears to have spurred a tactical shift by
Germany," said Marc Chandler, global head of currency strategy
at Brown Brothers Harriman in New York. 
    "It seems more determined than it has been in making sure
that the Athens program remains intact."
    The yen, meanwhile, fell across the board on weak Japanese
export data and expectations of further monetary easing from the
Bank of Japan. It fell to a 6-1/2 month low against the euro and
a 7-1/2 month trough versus the dollar.
    In midday New York trading, the euro climbed to a peak of
105.82 yen, its highest since early May. It was last
at 105.56 yen, up 0.9 percent.
    Against the dollar, the euro was slightly up at
$1.2818, off a session low of $1.2733.
    Camilla Sutton, chief currency strategist, at Scotia Capital
in Toronto said the euro stands to benefit in the event
investors square up their books ahead of the U.S. holiday
weekend given that the market is currently short the single euro
zone currency.
    Markets are closed on Thursday due to the U.S. Thanksgiving
holiday.
    Sutton expects the euro to trade in narrow ranges in the 
near term, closing the year around $1.27 and trending lower in
2013, possibly closing at $1.25.     
    The single currency has also been under pressure from recent
economic data showing the euro zone is in recession and from
uncertainty over Spain. Madrid has not yet requested the
financial aid many in markets think it needs and the country
faces a secessionist threat in a regional election on Sunday in
Catalonia. 
    
    YEN STUMBLES
    The dollar rose as high as 82.53 yen, its strongest
level since early April as the main opposition Liberal
Democratic Party, tipped to win in a parliamentary election next
month, pledged to push for further easing by the BOJ.
 It last traded at 82.34, up 0.8 percent.
    The dollar broke through reported options barrier at 82 yen,
triggering stop-loss orders. It was the dollar's sixth
consecutive day of gains against the yen.
    The yen was also hurt by data showing Japanese exports
declined for a fifth month in succession, fanning concern the
country may be slipping into recession. 
    "Between a net trade and current account deficit, more money
is now flowing out of Japan, which is extremely negative for the
yen," said Kathy Lien, managing director of FX strategy at BK
Asset Management in New York.
    "In fact, it is so negative that it completely overshadowed
pre-positioning for the U.S. fiscal cliff."
    If the dollar ends the year above 76.90 yen, this would be
the first positive year for the currency pair in six years. Lien
said this has been caused entirely by weak Japanese
fundamentals.
    The Australian dollar also rose to a 7-1/2 month high of
85.42 yen. It last changed hands at 85.15 yen, up 0.3
percent.
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