* Greenback gains ground again after volatile week
* OPEC meeting eyed, oil prices slip again
* Italian political woes, bank concerns weigh on euro
* Trading desks brace for month-end shift after bond
By Patrick Graham
LONDON, Nov 29 The dollar gained ground against
the yen on Tuesday after a roller-coaster 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 before
Sunday's Italian referendum or the yen into Wednesday's meeting
of OPEC producers, despite doubts over the chances of a deal to
support oil prices that would boost riskier currencies like the
Aussie and Canadian dollars. Oil prices were down almost 3
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, inched 0.2 percent higher as U.S.
investors began to have an influence in midday trade in London.
At 101.54, it was still half a point off a nearly 14-year peak
of 102.050 but a full percentage point higher at 113.04
yen It gained 0.3 percent against the euro to $1.0579.
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
before the vote, which could unseat the government of Prime
Minister Matteo Renzi and derail his plan to refloat the banks
However, complicated political scenarios may play out. Some
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.
"The euro probably comes down a bit if he loses and last
year's highs of $1.0458 are not far away," said Gavin Friend, a
strategist at National Australia Bank in London.
"But we may also then see calmer heads that understand that
it does not necessarily open the door to a Five Star government
and a departure from the EU. The broader dollar rally also seems
to have run out of a little bit of momentum. People are asking
questions of Trump."
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
Later on Tuesday, investors will look to data on U.S.
third-quarter gross domestic product, consumer confidence and
consumption for trading cues. They will be followed by the
November employment report on Friday.
"We are sort of caught in a no-man's land at the moment,"
said Javier Corominas, an analyst with currency fund Record
Currency Management in London.
"The critical dates are this Sunday, then the ECB meeting on
the 8th. We are largely long dollar at the moment, through our
momentum indicators. That is being offset by our medium-term
value, which is not."
(Editing by Larry King)