FOREX-Euro rises on optimism of U.S. fiscal cliff deal
* Euro gains vs dollar on optimism about U.S. budget deal
* Euro zone sentiment data due 1000 GMT
* Dollar gains vs yen expected to slow
By Anooja Debnath
LONDON, Nov 29 (Reuters) - The euro rose against the dollar on Thursday after comments from U.S. policymakers revived expectations of a deal being reached to avert sharp fiscal tightening in the world's largest economy.
U.S. House Speaker John Boehner, the top Republican in Congress, voiced optimism that Republicans could broker a deal with the White House to avoid the "fiscal cliff" of tax hikes and spending cuts due to kick in early next year.
President Barack Obama said on Wednesday he hoped to reach an agreement with Congress before Christmas.
The euro rose 0.2 percent to $1.2972, with near-term support seen at $1.2918, the 55-day moving average. It neared a one-month high of $1.3010, hit on Tuesday after Greece's lenders arrived at an agreement to support the indebted country
"Some comfort is being drawn from positive news on the U.S. fiscal cliff and is supporting the euro this morning," said Ian Stannard, head of European FX strategy at Morgan Stanley.
A drop in the 10-year Italian government bond yield to its lowest level in nearly two years was another supportive factor for the euro, as it suggested that investor jitters over the euro zone's debt crisis were diminishing.
Some analysts warned the euro was still vulnerable to economic data and concerns about elements of Greece's aid deal, with Athen's ability to fully implement a debt buy-back a looming issue.
Euro zone economic sentiment data is due at 1000 GMT and weak data could see the euro slip. A Reuters poll expects a reading of 84.2, down slightly from 84.5 last month.
"The one thing that is going to take the steam out of the euro's rebound is if we see the sentiment indicators later this morning come in softer than expected," said Morgan Stanley's Stannard.
Against the yen, the euro was up 0.3 percent at 106.57 yen , not too far from a seven-month high of 107.135 yen hit on Monday.
YEN LOSSES SLOW
The dollar edged up 0.1 percent to about 82.15 yen, inching away from a one-week low of 81.68 yen hit on Wednesday.
The greenback has seen a corrective pull-back since hitting a 7-1/2 month high of 82.84 yen last Thursday.
"I can feel a bit of long dollar/yen fatigue setting in," said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore. There were some dollar offers near 82.50 yen, while dollar bids were lurking in the 81.60-81.80 yen area, he said.
The yen has come under pressure recently due to market speculation about the chances of 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, sparking a 4 percent fall in the yen earlier this month.
But some market players were paring back expectations of aggressive easing that would weigh on the yen, and questioned how much impact Abe will have on monetary policy.
The dollar is likely to trade in a range of 81.00 yen to 83.00 yen ahead of Japan's election, said a trader for a Japanese bank in Singapore.
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