* Greenback inches higher after volatile week
* OPEC meeting eyed, oil prices dip again
* Italian political woes, bank concerns weigh on euro
* Trading desks brace for big month-end shift after bond
By Patrick Graham
LONDON, Nov 29 The dollar inched higher on
Tuesday after a rollercoaster 24 hours which traders say may
just be a precursor to three weeks of risk-packed events for the
$5 trillion a day currency market.
Widely expected to rise next year on Donald Trump's promised
fiscal boost for the U.S. economy, the dollar has peaked and
troughed since Thursday's Thanksgiving holiday with the dominant
tone some profit-taking on gains since the Nov. 8 election.
But players are also concerned about holding the euro into
Sunday's Italian referendum or the yen into a meeting of OPEC
producers which could generate a deal that supports oil prices
and global appetite for risk. Oil prices were down more than 1
percent on Tuesday.
Added to that is the scale of the move in global bond prices
this month which means there may be significant moves over the
next 24 hours to rebalance the values of bonds, equities and
particular currencies in major houses' portfolios for month-end.
"A lot of these rotations are going to occur and you'd
imagine dollar assets will be sold and yen assets will be
bought," said Richard Benson, co-head of portfolio investment
with currency fund Millennium Global in London.
"That will dominate tomorrow along with the nervousness
around the OPEC meeting. In general we are really loaded for the
next three weeks."
The dollar index, which tracks the greenback against a
basket of six major rivals, scaled a nearly 14-year peak of
102.050 on Thursday before profit-taking and oil price
jitters brought it back down to earth. It was last at 101.39, up
0.1 percent on the day.
But that included a half percent gain to 112.54 yen
and a 0.2 percent rise to $1.0595 per euro.
Price action over the last day suggests those investors
betting on a hit to the euro from Sunday's vote in Italy are
doing so by buying options contracts that pay out if the
currency moves below $1.05 - cheaper in capital and risk terms
than holding a cash position in the currency itself.
Worries about Italy's banking system have been mounting
ahead of the vote, which could unseat the government of Prime
Minister Matteo Renzi and derail his plan to refloat the banks.
However, there are complicated political scenarios that may
play out. Some players wonder if Renzi's resignation will be
accepted, others whether European authorities will step in
quickly to ensure the banks are secure if he loses.
"There is quite a lot of negativity and referendum risk in
the price," said Benson. "So it is possible that Renzi will
resign, and the market will rally because there is some kind of
bank bailout announced."
Italian lender Monte dei Paschi di Siena faces
more than 8 billion euros of legal claims, and says its
weakening liquidity and the potential for more bad loan
writedowns are among risks to its 5 billion euro rescue plan.
The dollar is far off the 8-month high of 113.90 it touched
Later on Tuesday, investors will look to U.S. third-quarter
gross domestic product data as well as readings on consumer
confidence and consumption for trading cues. They will be
followed by the November employment report on Friday.
"The dollar has been pulling back now in response to
volatile oil prices, after rising on expectations of what Trump
will do," said Mitsuo Imaizumi, chief currency strategist at
Daiwa Securities in Tokyo.
"Against the yen, it could even fall back to the 110 level,
depending on what oil does, and we also have U.S. data this week
- although right now, the employment figures seem like a long
time away," he said.
(Editing by Catherine Evans)