FOREX-Euro buoyed by Greek deal approval, month-end buying

Fri Nov 30, 2012 11:59am EST

Related Topics

* Yen falls vs dollar, euro, traders cite month-end selling
    * Euro hits 7-month high versus yen, 5-week high vs dollar
    * Expectations of BoJ easing add to demand to sell yen
    * Euro extends gains despite weak euro zone data

    By Gertrude Chavez-Dreyfuss
    NEW YORK, Nov 30 (Reuters) - The euro hit a seven-month high
against the yen and a five-week peak versus the dollar on
Friday, bolstered by the approval of the latest Greek bailout
deal by German lawmakers and month-end buying from Japanese
importers.
    Gains in Europe's shared currency came despite weak euro
zone data that included a sharp drop in German retail sales, a
fall in French consumer spending and record-high unemployment
for the euro zone. 
  
    The euro has advanced for a third straight month in November
against both the yen and dollar, rising 3.8 percent and 0.4
percent, respectively.
    "Today's move is about the German parliament approving the 
Greek bailout, which gives traders and investors a bit more
confidence about the euro zone debt crisis," said Chris Gaffney,
co-chief investment officer at Everbank Wealth Management in St.
Louis, Missouri. 
    That doesn't mean that investors would be buying more euros
from now on, Gaffney said. "With unemployment still sitting at
11 percent in the euro zone and inflation at just two percent, I
can't see how the euro can move up from here, other than people
looking at an alternative to the dollar."
    The yen, meanwhile, was pummeled across the board amid
speculation Japanese monetary policy could be aggressively eased
when a new government is formed. 
    Although main opposition leader Shinzo Abe, a front-runner
to become the new prime minister, seemed to have softened his
aggressive stance on Bank of Japan independence, he did
reiterate his desire for the bank to buy foreign bonds.
 Analysts said that helped push the yen lower
both against the euro and dollar.
    In midday New York trading, the euro rose 7
percent to 107.28 yen. Earlier it climbed to 107.66, its highest
since late April. Market players cited month-end demand for the
euro from Japanese importers.
    The euro has posted its best monthly performance in November
since June.
    Against the dollar, the euro was up 0.2 percent at
$1.3006, having earlier touched $1.3027, its strongest level
since Oct. 23. Traders reported offers at $1.3040-50 which may
limit its gains.
    German lawmakers on Friday approved the latest Greek bailout
by a large majority, helping the euro's cause. 
    The euro zone currency, however, dipped to session lows
against the dollar after weak U.S. personal income and spending
data. The data dented the market's risk appetite as investors 
sought the dollar for its safety appeal. 
    "The disappointing data has dampened the modest enthusiasm
that major economies are gaining strength," said Joe Manimbo,
senior market analyst at Western Union Business Solutions in
Washington. "The report also  reinforces the fact that U.S.
growth in Q4 would be weak." 
    The dollar climbed 0.4 percent to 82.48 yen, close to
a near eight-month high of 82.84 yen hit last week, and up 3.4
percent on the month. That would be the dollar's best monthly
performance since February.
    Market players said uncertainty over whether U.S.
policymakers can reach a deal to avert a looming "fiscal cliff"
of tax hikes and spending cuts may also temper dollar gains
against the yen, although many still expected weakness in the
Japanese currency to persist.
    The dollar overall has held up pretty well amid uncertainty
about the U.S. budget. The dollar index ended the month
of November up 0.2 percent after two straight months of losses. 
    Investors tend to sell the euro and buy the safe-haven
dollar on any headlines that suggest that U.S. budget talks are
not going well. Failure to reach a deal before tax hikes and
spending cuts kick in early next year could tip the world's
largest economy into recession.
    "The dollar is holding its ground only because of liquidity
flows. It's a liquidity haven, nothing more," Everbank's Gaffney
said. "Once everything stabilizes, we will see a move out of
both dollars and euros into some of these emerging market
currencies."
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