* Market disappointed by lack of deal on Greece
* Yen under pressure on speculation of BOJ easing
* RSI puts dollar/yen in overbought territory
* Abe "magic" may run out by U.S. Thanksgiving -analyst
By Hideyuki Sano
TOKYO, Nov 21 The euro slid on Wednesday after
Greece's international lenders failed to agree a deal to support
the indebted country, while the yen dropped to 7-1/2 month lows
against the dollar on speculation of more monetary easing in
Euro zone finance ministers, the International Monetary Fund
and the European Central Bank ended 12-straight hours of talks
without agreement on the next tranche of loans to Athens, as
they haggled over myriad options on how to reduce the country's
debt to a sustainable level.
The euro fell about 0.5 percent to $1.2748, heading
towards a two-month low of $1.2661 hit last week and putting its
nascent recovery since then at risk.
That low is not far from its levels just before the European
Central Bank unveiled its government bond buying scheme in
September with an eye on Spain, called Outright Monetary
"The effect of the OMT appears to be wearing thin ... I
think the euro zone will eventually release the money given that
euro zone finance ministers have already agreed on a two-year
extension of the budget target for Greece. But testing further
upside seems difficult for the euro," said Minori Uchida, chief
FX strategist at the bank of Tokyo-Mitsubishi UFJ.
Lenders will now try to hammer out an agreement at another
meeting next Monday.
On top of the festering Greek saga, the common currency is
also smarting from the spectre of recession in the euro zone and
uncertainty over Spain, which has not yet requested financial
aid and faces a secessionist threat in a regional election on
Sunday in Catalonia.
On the other hand, the Japanese yen was dented by
speculation of more aggressive easing by the Bank of Japan as
well as poor Japanese export data.
The dollar rose as high as 81.975 yen, a level not
seen since early April, with its advance blocked by selling
related to hedging for an options barrier at 82 yen, though a
break there should trigger more short-covering.
It last stood at 81.90 yen, a gain of 0.2 percent from late
U.S. levels, extending its rally into a sixth day for a total
gain of 3.2 percent.
The euro also hit a 6-1/2 month high of 105.065 yen
just before the disappointing news out of Brussels
knocked the common currency down to 104.47 yen, 0.2
percent below late U.S. levels.
The yen was also undermined by data showing Japan's exports
fell more than expected in October, cementing worries the
country is in for a recession in the current quarter.
"The data was not just worse than expected but also
underscored the poor state of the economy. The yen's downtrend
seems pretty solid now," said Katsunori Kitakura, associate
general manager of market making at Sumitomo Trust Bank.
Japan's trade deficit also means corporate currency flows
now favour the dollar over the yen.
"In the past, Japanese exporters' yen-buying would have
stemmed any sharp fall in the yen. But Japan is now running a
trade deficit, and it's as if there's no brake to use when the
yen falls," said Mitsubishi Bank's Uchida.
The yen has been falling sharply since Prime Minister
Yoshihko Noda called an election on Dec. 16 and the main
opposition leader, a front-runner to become the next premier, is
pushing the Bank of Japan for more aggressive monetary stimulus.
Shinzo Abe, the leader of the Liberal Democratic Party, has
put monetary policy at the centre of debate ahead of the
election, calling for "unlimited easing", pushing rates below
zero, directly underwriting bonds issued to fund public
works, and setting an inflation target as high as 3 percent.
While sentiment over the yen is weak, oscillators such as
the relative strength index are showing signs the yen may be
oversold in the short-term and some analysts say the latest bout
of yen weakness may be coming to an end soon.
"Abe now has few other things left to say about monetary
policy. It's about the time the power of his magic runs out,"
said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking
Corp, adding that the yen's slide will likely have run its
course by the U.S. Thanksgiving holiday on Thursday.