* Tapering of Fed stimulus still not seen imminent
* Euro helped by hopes of banking union deal
* No immediate reaction to budget deal in Washington
By Hideyuki Sano
TOKYO, Dec 11 The dollar wobbled near a six-week
low against a basket of currencies on Wednesday, hampered by a
growing view that the Federal Reserve needs more positive
economic data before it decides to start reducing its monetary
By contrast, the euro drew additional help from expectations
of a banking deal in the euro zone while other European
currencies, such as sterling and the Swiss franc, benefited from
signs of improvement in their economies.
"The fall in U.S. bond yields pressured the dollar. Although
the Fed is on course to taper its stimulus, it is still not seen
as imminent," said Shinichiro Kadota, chief FX strategist at
Barclays in Tokyo.
The dollar index, which measures its value against a basket
of six major currencies, stood at 79.98, having hit a six-week
low of 79.843 on Tuesday.
The dollar has been capped since mid-November, when Janet
Yellen, the next Fed chief, confirmed investors' belief that she
will pursue an easy monetary policy to support job growth.
Although a strong reading in last week's payrolls data
raised speculation the Fed could trim its bond buying even as
early as next week, U.S. bond yields remained below their
September peak as investors think Yellen will keep rates low for
a long time even after stimulus will have been withdrawn.
The dollar showed no immediate reaction to the news that
budget negotiators in the U.S. Congress have reached a two-year
agreement aimed at avoiding a government shutdown on Jan. 15.
The news could bolster the dollar, though traders will be
scrutinising the details of the deal before jumping to trade on
In early Asia, the euro traded flat at $1.3760,
having risen to six-week high of $1.3795 and close to its
year-to-date peak of $1.3833 hit in late October.
Against the yen, the common currency fetched 141.55 yen
, having risen as high as 142.19 yen, a level last
seen in October 2008.
European Union finance ministers, meeting in Brussels, edged
closer to agreeing on a plan to form a new agency charged with
closing down ailing euro zone banks and sharing the costs.
The issue is crucial as a banking union is widely viewed as
shoring up the euro zone against future debt and financial
"There's some expectation that a deal may be reached before
year-end, and that is supportive of the euro," said Sireen
Harajli, a currency strategist at Mizuho Bank Ltd in New York.
Other European currencies were also buoyant with sterling
sitting near a two-year high against the dollar hit on Tuesday
following comments from the Bank of England and strong house
prices earlier this week.
The pound stood at $1.6450, near a two-year high of
$1.6468 on Tuesday.
The Swiss franc was even stronger, helped by signs that
deflation in Switzerland is abating and the economy is growing.
The euro traded at 1.2211 franc, just above a
seven-month low of 1.2207 touched on Tuesday, while the dollar
hit a two-year low of 0.8850 franc on Tuesday.
The Swiss central bank is widely expected to keep its
commitment to the euro/Swiss franc peg at 1.20 francs at its
policy meeting on Thursday.
The dollar also sagged against the yen to 102.91 yen,
from Tuesday's high of 103.40 yen, though the yen is seen
staying under pressure from expectations the Bank of Japan could
expand its asset-purchase programme next year to achieve its
ambitious inflation target.