FOREX-Euro falls versus dollar, yen on doubts over Greece deal

Tue Nov 27, 2012 2:52pm EST

Related Topics

* Investors keen for more clarity on EU/IMF Greece deal
    * Dollar direction to hinge on fiscal cliff scenario
    * Yen weak as Japan's opposition wants bolder stimulus

    By Wanfeng Zhou
    NEW YORK, Nov 27 (Reuters) - The euro edged lower against
the dollar and yen on Tuesday as optimism about a Greek debt
deal gave way to worries about the lack of details in the plan.
    The single currency shared by 17 countries had risen to a
near one-month high above $1.30 after euro zone finance
ministers and the International Monetary Fund agreed to reduce
Greece's debt, which paves the way for the release of Greece's
urgently needed aid loans. 
    While the deal may have bought some more time for Greece,
investors focused on the lack of details on a Greek bond
buyback, which has to be carried out before the IMF can release
its share of the aid tranche in December. There was also concern
about Athens' ability to meet debt reduction targets to ensure
release of cash installments.
    "Market participants are not overly enthused by the
tentative deal," said Samarjit Shankar, managing director of
global FX strategy at BNY Mellon in Boston.
    "Questions persist about the proposed debt buyback --
against this backdrop, we are seeing renewed modest net selling
of the euro."
    The euro last traded at $1.2931, down 0.3 percent,
having hit a one-month high of $1.3009 on Reuters data.
    Some traders also booked profits after the euro posted its
best week in more than two months last week.
    "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."
    Against the yen, the euro slipped 0.1 percent to 106.33
.
    Analysts 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 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," said  Niels Christensen, FX strategist at Nordea.
    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 $1.2916.
    Failure by Greece to follow through and implement more
reforms in the months ahead would risk another flare-up in the
debt crisis and open to door to renewed losses for the single
currency, analysts said.
    The dollar rose 0.2 percent to 82.19 yen, off 7-1/2
month high of 82.82 yen set last Thursday. The dollar also rose
0.2 percent to 80.412 against a basket of currencies.
    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. 
    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. 
    Data showing U.S. consumer confidence had risen to the
highest in more that four years also buoyed the dollar.
    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.
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