CORRECTED-FOREX-Euro falls from 1-mo high; Greece relief impact fleeting

Tue Nov 27, 2012 1:19pm EST

Related Topics

(Corrects first paragraph to second straight session from first
time in five sessions)
    * EU/IMF agree on new debt target for Greece
    * Euro falls from 1-month high as market skepticism on deal
grows
    * Dollar direction to hinge on fiscal cliff scenario
    * Yen weak after Japan opposition leader calls for bolder
stimulus

    By Julie Haviv
    NEW YORK, Nov 27 (Reuters) - The euro fell against the
dollar for a second straight session on Tuesday as a deal to
rescue Greece spurred profit-taking amid ongoing worries about
the broader euro zone. 
    The single currency shared by 17 countries earlier rose
above the key psychological level of $1.30, its highest level in
a month, on news of an agreement between euro zone finance
ministers and the International Monetary Fund to reduce Greece's
debt. The deal paves the way for the release of Greece's
urgently needed aid loans.  
    Speculation that a deal for Greece would come to fruition
caused the euro to notch its largest gain against the dollar
since mid-September last week. The currency had appreciated by
about 2 percent after gaining for two straight weeks.
    "Investors who were buying on the rumor have been selling on
the news," said Brad Bechtel, managing director at Faros Trading
in Stamford, Connecticut.
    "With the Greece news out of the way investors have been 
booking profits on the short-term euro gains," he said.
"Month-end rebalancing is also playing a role today, with
positioning  in equities and bonds spilling over into the
currency market."
    The euro last traded at $1.2934, down 0.2 percent on
the day, well below a one-month high of $1.3009 struck earlier
during the Asian session when the deal on Greek debt was
reached. 
    Data showing U.S. consumer confidence had risen to the
highest in more that four years also buoyed the dollar.
    "Crosswinds, however, should keep the euro rangebound at
between $1.28 and $1.30 until the end of the year," Bechtel
said.
    After 12 hours of talks, international lenders agreed on a
package of measures to reduce Greek debt by more than 40 billion
euros, projected to cut it to 124 percent of gross domestic
product by 2020. 
    "The eyes of the financial world will closely watch Athens
to see if it can follow through and implement more reforms to
keep the bailout money flowing in the months ahead," said Joe
Manimbo, senior market analyst at Western Union Business
Solutions in Washington D.C.
    "Failure to do so would risk another flare-up in the Greek
debt crisis and open to door to renewed losses for the single
currency."
    Analysts, however, said the Greek deal would provide only 
temporary relief as the worsening economic outlook for the euro
zone, under relentless austerity measures, would keep the euro
under pressure, especially against the dollar.
    "The initial reaction was positive for the euro as at first
people were relieved that an agreement had been reached. But
looking at the details, sentiment has turned a bit sour," said 
Niels Christensen, FX strategist at Nordea.
    "The problem for Greece might be solved for the moment but
there are bigger problems like Spain, and with the dire growth
outlook for the euro zone, that will be very difficult to
solve."
    Christensen said the euro's failure to move decisively above
$1.30 might have triggered some profit-taking on long
euro/dollar positions. This could wind back the single
currency's recent gains. Near-term support for the euro lay at
its 55-day moving average of $1.29187.
    The dollar's direction in the coming weeks will be heavily
swayed by whether U.S. lawmakers reach a sweeping deficit
reduction agreement by the end of the year. A deal needs to be
done to avoid the so-called "fiscal cliff" of tax increases and
spending cuts due to take effect at the beginning next year.  
    Congress and the White House, however, remain at odds on a
deal, and the uncertainty that results typically boosts the
appeal of the safe-haven dollar.   
    
    BUY ON DIPS FOR YEN
    Japan's opposition leader, Shinzo Abe, who is likely to
become the country's next prime minister after an election next
month, reiterated calls for bolder monetary and fiscal stimulus
to revive the country's economy. 
    That is expected to keep the yen under pressure, despite its
slight recovery on Tuesday. 
    The Japanese currency has fallen sharply over past weeks on
mounting speculation that a new government after Dec. 16 general
elections will coerce the Bank of Japan into easing monetary
policy aggressively. 
    Data from the U.S. Commodity Futures Trading Commission
showed that currency speculators increased their bearish bets
against the yen in the week ended Nov. 20, a period when the
Japanese currency began its slide. 
    The dollar hit a 7-1/2 month high of 82.82 yen last
Thursday. It last traded at 82.24 yen, up 0.2 percent on
the day, according to Reuters data.

 (Additional reporting by Anooja Debnath in London; Editing by
Dan Grebler)
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