* Obama says US fiscal deal in sight
* Euro up 1.8 pct vs dollar in 2012
* Dollar surges 11 pct vs yen this year
By Gertrude Chavez-Dreyfuss
NEW YORK, Dec 31 The dollar rose against most
currencies on Monday in thin trading, and held its gains even
after President Barack Obama said a deal was in sight to avert a
fiscal disaster that would have meant tax hikes and spending
cuts for the world's largest economy.
The dollar could come under pressure if a compromise
agreement on the U.S. budget encourages investors to buy riskier
assets, driving flows away from the safe-haven and highly-liquid
Obama said on Monday, the deadline before the U.S. economy
goes over the "fiscal cliff", a deal on the budget was within
sight but was not complete yet.
His comments bolstered other riskier currencies such as the
Australian, New Zealand, and Canadian dollars.
"Even though, it's not definitive yet, overall it is
hopeful," said Nick Bennenbroek, head of New York FX strategy,
at Wells Fargo in New York
"So long as Obama's statements are consistent with the idea
that we are getting a deal, that is going to keep the market
relatively calm. That should be positive for foreign currencies
because of risk appetite and negative for the dollar as a
He pointed out that Obama's remarks had limited impact on
the currency market only because some participants that could
have traded on this news were out of the office.
The dollar index was up 0.1 percent at 79.787 in
early afternoon trading. It was down 0.5 percent this year,
falling after two straight years of gains.
Analysts said Congress could pass legislation in 2013 that
retroactively prevents the United States going over the fiscal
cliff, an option that is viewed as politically easier.
The euro was down 0.2 percent on the day at $1.3192,
with selling accelerated just before the London close. Near-term
support was seen around $1.3142, the low set on Dec. 17,
according to Reuters data. Any euro gains would be capped at
$1.3308, the 8-1/2 month high on Dec. 19, traders said.
The euro has gained 1.8 percent against the dollar this
year, overcoming worries about a euro zone break-up and any
sovereign debt defaults.
Sentiment toward the euro improved after the European
Central Bank pledged to buy bonds of indebted peripheral
countries. Positioning data showed speculators sharply reduced
bets against the euro in the week ended Dec. 24.
Obama's statement helped boost the Australian dollar, which
rose 0.3 percent to US$1.0398. The U.S. dollar fell 0.4
percent versus the Canadian unit to C$0.9933, while the
New Zealand dollar rose 1 percent.
The yen continued its slide, with the dollar nearing a
two-year peak against the Japanese currency due to expectations
of more monetary easing by the Bank of Japan. The dollar hit a
high of 86.68, its strongest level since August 2010. It was
last at 86.62, up 0.6 percent on the day.
The yen fell more than 11 percent in 2012, its worst yearly
performance since 2005.
The euro rose 0.4 percent to 114.28 yen, below a
17-month high of 114.68 yen set on Friday. The euro has risen 15
percent against the yen in 2012, its biggest yearly percentage
gain since it was launched in 1999.
With a new Japanese government led by Prime Minister Shinzo
Abe expected to pursue aggressive monetary easing and heavy
fiscal spending to beat deflation, analysts see the yen staying
under pressure in 2013. Any drop in the dollar against the yen
would likely to be limited.