* Euro falls after Fed minutes show wariness on bond buying
* Focus shifts to Friday's jobs data, debt ceiling debate
* Yen up vs dollar after hitting highest since July 2010
NEW YORK, Jan 3 The euro fell to a three-week
low against the dollar on Thursday after minutes from the
Federal Reserve's latest meeting indicated that while the U.S.
central bank looks set to continue buying bonds, some
policymakers believe it will be appropriate to "slow or stop
asset buys well before the end of 2013."
The minutes from the Fed's December meeting showed a growing
reticence about further increases in the central bank's $2.9
trillion balance sheet, which it expanded sharply in response to
the financial crisis and recession of 2007-2009.
The euro was already under pressure as optimism over a U.S.
budget deal quickly faded and investors looked ahead to the
release Friday of the closely watched U.S. government monthly
jobs report. The Fed minutes only accelerated the move.
"The minutes of the Federal Reserve's December FOMC monetary
policy meeting revealed a somewhat surprising level of concern
among the ranks of central bankers regarding the long-term
impact of the bank's asset purchase program, or quantitative
easing," said Omer Esiner, chief market analyst, at Commonwealth
Foreign Exchange in Washington.
The euro was last down 1 percent at $1.3051, in a
second straight session of declines. The session low of $1.3047
was the weakest since Dec. 13, according to Reuters data.
Traders said the euro's failure to break above $1.33 on
Wednesday drew sellers into the market early in the day. Some
$4.186 billion in euros changed hands on Thursday, according to
Reuters Dealing, compared with $6.076 billion the first Thursday
The euro had surged early on Wednesday after U.S. lawmakers
reached an agreement to avert a "fiscal cliff" of austerity
measures that included huge tax hikes and spending cuts, which
some economists feared would tip the world's biggest economy
But the euro surrendered gains as investors turned their
focus to the budget battles ahead. Analysts say the market could
be set up for volatility as President Barack Obama and
congressional Republicans tussle over the next two months.
"After yesterday's big move, the market is just taking a
little bit of a breather here," said Amarjit Sahota, director of
Klarity FX in San Francisco. "Focus is now turning to the debt
ceiling and the spending cuts, which still need to be agreed."
Republicans, angry that the fiscal cliff deal did little to
curb the federal deficit, promised to use the debt-ceiling
debate to win deep spending cuts next time.
Strategists said the weakness in the euro could persist as
the euro zone economy falls deeper into recession and on
increasing prospects of an interest rate cut by the European
Highlighting market concerns that the U.S. deficit issue
remain unresolved, ratings agency Moody's Investors Service said
the United States must do more to rescue its Aaa debt rating
from its current negative outlook.
Standard & Poor's said the fiscal deal does not affect its
negative view of the U.S. credit outlook, and said more work
remained ahead for policymakers.
EURO SAGS VS YEN
Adding to gains in the dollar versus the euro was data
showing U.S. private-sector employers added more new jobs than
expected last month.
Separate data showed U.S. initial jobless claims rose last
week, but the trend remained consistent with steady job growth.
On Friday, the U.S. government will release its monthly
nonfarm payrolls report. The economy likely added 150,000 in
December, according to a Reuters survey of economists, up from
146,000 in November. The unemployment rate is expected to hold
steady at 7.7 percent.
Against the yen, the euro fell 1.1 percent to 113.84 yen
as investors bet that its rise to an 18-month high of
115.99 yen on Wednesday was too far, too fast.
"Euro/yen at around 115 levels was starting to look a bit
overdone and the euro may actually lose ground against the yen
in the coming weeks," said Colin Asher, senior economist at
Mizuho Corporate Bank.
The dollar fell 0.1 percent to 87.26 yen, after
climbing as high as 87.36 earlier in the global session, the
highest since July 2010.