FOREX-Euro off one-month highs as U.S. fiscal talk weighs

Thu Nov 29, 2012 4:46pm EST

Related Topics

* Boehner says no progress on budget talks in last 2 weeks
    * Italian yields fall, euro zone sentiment improves
    * Dollar's gains versus yen may slow


    By Wanfeng Zhou
    NEW YORK, Nov 29 (Reuters) - The euro came off a one-month
high against the dollar on Thursday after top Republican
lawmaker John Boehner dented hopes for a budget deal that could
prevent the U.S. economy from slipping back into a possible
recession next year.
    The euro zone common currency had earlier risen above $1.30
on expectations that U.S. politicians would reach an agreement.
But it pared gains to trade just slightly higher on the day by
late morning.
    A day after expressing optimism over a U.S. "fiscal cliff
deal," Boehner, speaker of the U.S. House of Representatives, on
Thursday said there had been no "substantive" progress made in
the last two weeks.
    "The euro trajectory may be very likely tied to the fiscal
cliff going forward. Without a proper resolution, it's hard to
see the euro break its current ranges," said Ravi Bharadwaj,
pricing and market analyst at Western Union Business Solutions
in Washington.
    Congressional budget analysts have warned that the fiscal
cliff's approximately $600 billion in tax hikes and spending
cuts that would begin in 2013 would push the U.S. economy back
into recession. 
    A deal to avert the cliff would boost the outlook for the
economy and lift growth-linked currencies such as the euro and
the Australian dollar.
    Following a meeting with Treasury Secretary Timothy
Geithner, the White House's main liaison to Congress, Boehner
said Geithner had not provided a comprehensive plan for dealing
with the budget problem. 
    The euro was up 0.2 percent at $1.2973, after earlier
hitting a one-month high of $1.3013 on Reuters data as traders
also reported month-end demand for euros.
    A drop in Italy's 10-year borrowing costs at a sale of debt
on Thursday and positive euro zone data helped support the
currency.  
    The euro also cut gains after Democratic Congressman Chris
Van Hollen told MSNBC that lawmakers were not close to a U.S.
budget deal, traders said. Van Hollen is the top Democrat on the
House Budget Committee.
    Investors were cautious about pushing the euro higher. Some
analysts warned the euro remained vulnerable to economic data
and concerns about elements of Greece's aid deal. Greece's
ability to fully implement a debt buy-back is a looming issue.
    "I think by year-end, the euro can get down to the
$1.23-$1.24 area," Newedge's Dowd said. "That assumes that,
number one, a fiscal cliff would be averted and that would get
the dollar bid, and number two that the situation in Europe
would just muddle through."
    Against the yen, the euro was up 0.2 percent at 106.53 yen
. On Monday, the euro hit a seven-month high of 107.13
yen on Monday.
    U.S. data on Thursday, though slightly below expectations,
pointed to an upturn in the economy, feeding risk appetite and
helping the euro hold gains against both the dollar and yen.
    The government reported new claims for U.S. jobless benefits
fell for a second straight week, and in a separate report said
the economy grew by 2.7 percent in the third quarter, a faster
rate than initially estimated. 
    "The positive revision to economic growth in the third
quarter is consistent with job creation that was almost three
times faster than in the previous three months," said Joseph
Trevisani, chief market strategist at Worldwide Markets in
Woodcliff Lake, New Jersey.
    The dollar edged 0.1 percent higher at 82.09 yen,
pulling away from a one-week low of 81.67 set on Wednesday.
    The U.S. currency hit a 7-1/2-month high of 82.82 yen last
Thursday on speculation about possible aggressive monetary
easing in Japan following a likely change in government next
month.
    Main opposition leader Shinzo Abe, a front-runner to become
prime minister after the Dec. 16 election, has called for
radical change in monetary policy, including unlimited easing.
His stance sparked a 4 percent fall in the yen this month. 
    Some market players, however, were paring back expectations
of aggressive easing and questioned how much impact Abe would
have on monetary policy.
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