November 30, 2012 / 7:25 PM / in 5 years

FOREX-Euro rises vs dollar, heads for 4th straight month of gains

4 Min Read

* Euro hits 7-month high vs yen, more than 5-week high vs
    * U.S. fiscal talks dominate traders attention
    * Expectations of BoJ easing add to selling pressure on yen

    By Wanfeng Zhou
    NEW YORK, Nov 30 (Reuters) - The euro rose to its highest in
more than five weeks against the dollar on Friday, heading for
its fourth straight month of gains, as investors clung to hopes
that U.S. politicians would reach a fiscal deal before the end
of the year.
    The yen slumped and was on track for its worst month since
February against the dollar on speculation that a likely change
in Japan's government would lead to aggressive monetary easing.
    For the past few weeks, financial markets have traded on
headlines from U.S. political leaders on the "fiscal cliff,"
which refers to tax hikes and spending cuts worth $600 billion
set to kick in early next year that could hurt the economy.
    U.S. House of Representatives Speaker John Boehner said
Republicans and President Barack Obama are locked in a
stalemate. Obama blamed Republicans who control the House of
holding up a deal.  
    "The market is sort of anticipating that some kind of a
compromise will be reached before Dec. 31. That's the mindset of
the market right now," said Fabian Eliasson, vice president of
currency sales at Mizuho Corporate Bank in New York.
    The euro rose 0.2 percent to $1.2998, having earlier
touched $1.3027 on Reuters data, its strongest level since Oct.
23. Traders reported offers at $1.3040-50.
    For the month, the euro rose 0.3 percent against the dollar.
    German lawmakers on Friday approved the latest Greek bailout
by a large majority, also helping euro sentiment. But the
outcome was widely expected. 
    Gains in Europe's shared currency came despite weak 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 gloomy economic outlook for the euro zone should limit
further strength in the euro, analysts 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," said Chris Gaffney, co-chief
investment officer at Everbank Wealth Management in St. Louis,
    The euro 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 rose 0.5 percent to 82.51 yen, close to a
near eight-month high of 82.82 yen hit last week. It was on pace
for a gain of 3.4 percent in November, the biggest since
    The euro rose 0.7 percent to 107.25 yen. Earlier
it climbed to 107.66, its highest since late April. Traders
cited month-end demand for the euro from Japanese importers. 
    In November, the euro rallied 3.8 percent, the best month
since June against the yen.
    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.
    "The market is gearing up towards the Dec. 16 election,"
said Eliasson. He said with growing expectations for further
easing, the dollar could rise further to 85 to 87 yen if the
election goes as expected.  
    The dollar index ended the month of November up 0.3
percent after three straight months of losses.

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