* Euro's gains capped before finance ministers' meeting
* Greece approves budget, concerns about aid remain
* U.S. fiscal worries hits appetite for risky assets
By Anooja Debnath
LONDON, Nov 12 The euro inched up from a recent
two-month low against the dollar on Monday after Greece's ruling
coalition secured enough votes in parliament to approve a tough
Gains in the single currency were seen limited before a
meeting later in the day of euro zone finance ministers, who
were not expected to release fresh bailout funds for Greece.
Athens has to redeem 5 billion euros worth of treasury bills
on Nov. 16 and had been counting on cash from the aid tranche,
though a senior debt agency official said on Monday a T-bill
sale on Tuesday to refinance the bills should not be a problem..
The euro was flat on the day at $1.2715, off a
two-month low of $1.2690 struck on Friday, on EBS trading
platform. Traders cited stop loss sell orders below $1.2685 with
option expiries at $1.2700 and $1.2750.
This was likely to keep the euro between $1.2690 and
German Finance Minister Wolfgang Schaeuble told a German
newspaper on Sunday that the troika of international lenders to
Athens was unlikely to deliver its full report in time for the
euro zone finance ministers' meeting.
A spokeswoman for the ministry said that while Greece had
made progress, many issues remained open and it was unrealistic
to expect a final decision on Monday.
While the passage of the budget removed some of the
near-term uncertainty surrounding Greece, the euro is likely to
remain under pressure until an agreement on how to make Greek's
debt more sustainable is reached.
"What we are seeing in the past month has been a gradual
erosion of investor confidence in the euro zone and that is
starting to lead to renewed downward pressure on the euro," said
Lee Hardman, currency economist at BTMU.
"Ultimately the situation of Greece remains unsustainable
and these really are measures to kick the can down the road
rather than actually dealing with the situation effectively."
The single currency dropped to a two-month low against the
safe-haven Swiss franc to 1.20525 francs.
"The key issue will be what comes out of the Eurogroup
meeting. If the tranche is released it is positive for risk and
we should see a reasonable bounce in the euro, given the
pessimism that's been built into the markets about the euro
area," said Raghav Subbarao, FX strategist at Barclays.
Any euro bounce, though, could be short-lived as recent
economic data has shown the crisis which started in the euro
zone periphery is spreading to its core economies. Data due
later this week is forecast to show a slowdown in German growth
in coming quarters and France slipping into recession.
U.S. FISCAL WORRIES
Concerns about the so-called U.S. fiscal cliff has seen
safe-haven flows into the dollar and kept it near a two-month
high against a basket of currencies.
Demand for riskier currencies has been sluggish as investors
fret about the possible impact of some $600 billion in expiring
tax cuts and spending reductions due to take effect in January.
Currency speculators favoured the dollar in the latest week
for the first time since early September, according to data from
the Commodity Futures Trading Commission.
The dollar bought 79.44 yen, flat from Friday when it
fell as low as 79.07 yen, its weakest in nearly three weeks.
Markets shrugged off a 0.9 percent July-September
quarter-on-quarter contraction in Japanese economic output, in
line with forecasts. This was the first negative reading in
three quarters but it added to fears that slowing global growth
is pushing the economy into recession.
Morgan Stanley held to its medium-term view that the yen
would weaken and said it expected dollar/yen to resume its