* Tapering of Fed stimulus still not seen imminent
* Euro helped by hopes of banking union deal, year-end flows
* 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, hurt by the
perception the Federal Reserve is in no hurry to trim its
On the other hand, year-end repatriations by European banks
helped to underpin the euro, as did tighter money market
condition and expectations of a banking deal in the euro zone.
"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 80.01, little changed
in Asia but not far from a six-week low of 79.843 hit on
The dollar has been capped since mid-November, when Janet
Yellen, the incoming 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, a move early next year is seen as more
The dollar's attraction has also been tempered by a
widespread belief in markets that Yellen will keep rates low for
the foreseeable future even after the bond-buying stimulus has
been rolled back.
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.
While the accord is seen as positive for the dollar, traders
held off on trading on it. The deal still needs to pass both
houses of congress and does not address the debt ceiling that
needs to be raised some time next year.
In Asian trade, the euro stood little changed at $1.3748
, having risen the previous day to a six-week high of
$1.3795, near its year-to-date peak of $1.3833 hit in late
Against the yen, the common currency fetched 141.35 yen
, having risen as high as 142.19 yen on Tuesday, a
level last seen in October 2008.
The common currency, which gained 3.4 percent versus the
dollar and 7.7 percent against the yen from its low in November,
was also bolstered by the repatriation of funds by European
The banks are under pressure to shore up their capital bases
ahead of an ECB asset quality review, which will be based on
banks' balance sheets at the end of 2013.
A rise in euro zone money market rates has provided further
support for the currency after the European Central Bank last
week gave no hint of an immediate easing.
Some traders also cited hopes of a banking union as helping
the single currency. European Union finance ministers edged
closer to agreeing on a plan to form a new agency charged with
closing down ailing euro zone banks and sharing the costs.
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 $1.6440, 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 1.2218 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 102.81 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.
An equally listless Australian dollar dipped 0.2 percent to
$0.9135. The Aussie has been undermined by the Reserve
Bank of Australia's repeated attempt to talk down the currency
to support growth.