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

Tue Nov 27, 2012 4:37pm 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.
    Data showing U.S. consumer confidence at a four-year high
also provided a modest boost for the dollar, though a looming
budget crisis tempered optimism about the American economy and
kept dollar gains in check.
    The euro overnight notched a 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 emergency aid for the country. 
    But investors fretted over the lack of detail on a Greek
bond buy-back, which has to be carried out before the IMF can
release its share of aid in December. There was also concern
about Athens' ability to meet its debt reduction targets.
    "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 $1.2936, down 0.3 percent.
Earlier it reached a one-month high of $1.3009, on Reuters data.
    Against the yen, the dollar rose 0.1 percent to 82.15 yen
 after Japanese opposition leader Shinzo Abe, who is
expected to become prime minister after next month's election,
reiterated calls for bolder monetary policy and fiscal stimulus.
The dollar hit a 7-1/2-month high of 82.82 yen last
week. 
    The euro slipped 0.1 percent against the yen, to 106.31 yen
.
    Some traders booked profits after the Greek deal was
announced, taking advantage of the euro's rise last week, its
best weekly showing in more than two months.
    "Investors who were buying on the rumor have been selling on
the news," said Brad Bechtel, managing director at Faros Trading
in Stamford, Connecticut. "Month-end rebalancing is also playing
a role today, with positioning in equities and bonds spilling
over into the currency market."
    
    ECONOMIC WOES IN EUROPE, FISCAL CONFUSION IN US
    The dollar's direction in the coming weeks will be 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 "fiscal cliff" of tax increases and spending cuts due
to take effect at the beginning next year.
    The Congressional Budget Office has said that letting all
the tax and spending changes come into force would thrust the
U.S. economy back into recession.
    Congress and the White House remain at odds on a deal,
causing a level of uncertainty that typically boosts the appeal
of the safe-haven dollar. 
    Federal Reserve Chairman Ben Bernanke said last week that
2013 could be a very good year for the U.S. economy, provided
lawmakers avoid letting it sail over the fiscal cliff.
    A spike in consumer confidence in November added to optimism
and "shows there's more hope for the U.S. economy than for other
developed ones," said Kathy Lien, managing director of BK Asset
Management in New York. 
    Indeed, analysts said the euro would continue to struggle
around $1.30 given the worsening economic outlook for the
17-country euro zone.
    "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.
    He said a retreat to $1.2916, the euro's 55-day moving
average, might bring some buyers back to the market.
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