* Euro gains on prospects of deal on Greece funding
* Euro zone finance ministers give tentative go-ahead for
* Better signs on U.S. fiscal cliff lift risk sentiment
* BoJ ends 2-day meeting on Tuesday, no monetary easing
By Julie Haviv
NEW YORK, Nov 19 The euro rose to a near
two-week high against the U.S. dollar on Monday, buoyed by
appetite for risk on optimism that Greece will receive more
funding and signs of progress on resolving a looming U.S. fiscal
The common currency shared by the 17 euro zone countries,
however, is still down 1.2 percent so far in November and
analysts said it should struggle to retain gains even if
concerns about Greece abate.
Euro zone finance ministers will give a tentative go-ahead
for the disbursement of 44 billion euros in emergency loans to
Greece on Tuesday, but the money will only be paid on Dec. 5 if
the country meets all remaining conditions.
While the promise of additional funds for Greece removes an
important psychological obstacle, the country's economic
influence in the euro zone is relatively minor compared with
that of debt-burdened Italy and Spain.
Spain is the euro zone's fourth-largest economy and it has
not yet applied for a bailout. A bailout request would likely
cause the euro to rally above $1.30, according to strategists,
as it would pave the way for the European Central Bank to buy
Spain's bonds and lower the country's borrowing costs.
"For the euro/dollar to see an extended run ... a serious
improvement in risk appetite is needed, with a Spanish bailout
or an exceptionally quick compromise to the U.S. fiscal slope
necessary as the proper catalyst," said Christopher Vecchio,
currency analyst at DailyFX in New York.
The euro was last up 0.5 percent at $1.2804, having
hit a high of $1.2819, its highest since Nov. 7.
Another negative for the euro is the fact that the euro
zone's economy remains mired in a recession while the U.S.
economy has been steadily improving, as made evident by the
latest data on the housing market.
Home re-sales unexpectedly rose in October while
home-builder sentiment rose to its highest in more than six
Analysts at Morgan Stanley recommended buying the euro at
$1.2730, with a target of $1.33 and a stop at $1.2650.
FISCAL CLIFF CLIFFHANGER
Risk appetite improved, with world stock markets recovering
some of their sharp losses last week, fueled by comments from
U.S. lawmakers who indicated that compromises are possible in
negotiations to avert $600 billion in tax increases and spending
cuts due to start kicking in January.
Many believe this "fiscal cliff" threatens to send the U.S.
economy back into recession, but the dollar would benefit in
this scenario due to risk aversion.
The dollar should weaken against the Canadian dollar and
British pound into year-end, according to Camilla Sutton, chief
currency strategist at Scotiabank in Toronto.
"The focus post-U.S. election has been on the fiscal cliff,
which we recognize as an important risk; however we believe that
markets have moved too far into tunnel vision and are neglecting
other important dollar drivers," she said.
"The most important of which is the Fed meeting on Dec. 12,
where we expect QE3 to be expanded to include Treasuries (at the
conclusion of Operation Twist)."
The Fed's Operation Twist entails selling short-term
securities in exchange for long-term bonds.
Meanwhile, investors have been selling the yen after
elections were called for Dec. 16 and the leader of the
opposition Liberal Democratic Party called on the BOJ to print
"unlimited yen" and set rates at zero or below.
The yen slipped from its highs into negative territory
during late New York trade against the greenback. Caution
prevailed ahead of Tuesday's BOJ policy meeting, with most
analysts expecting no new monetary easing.
"The BOJ is meeting tonight and we don't expect additional
easing steps. But I think markets are looking ahead to how the
BOJ will react to a new government with an extremely dovish
stance," said Eric Viloria, chief currency strategist at
"There is a possibility that there could be less
independence for the central bank going forward and the market
is preparing for that," he said.
The dollar last traded up 0.14 percent to 81.38 yen,
according to Reuters data.