* Euro extends gains vs dollar after Greek bond buyback
* Dollar weakness persists across the board
* Deadlock on U.S. fiscal issue resolution weighs
* Yen weakness runs out of steam
By Anooja Debnath
LONDON, Dec 4 The euro hit a fresh six-week high
against the dollar on Tuesday, extending gains on
better-than-expected terms for a Greek debt buyback and falling
borrowing costs for indebted euro zone countries.
The euro had scope for more gains if yields on Spanish and
Italian bonds drop further, analysts said. Concerns U.S. budget
talks may be stalling also weighed on the dollar and helped push
it to a one-month low against a basket of currencies.
The euro edged up 0.2 percent to $1.3083, its highest
since Oct. 22, but stalled ahead of a reported options barrier
If it breaks above $1.3100 traders said it could rise
further as stop loss buy orders are triggered. Its next target
would be the October high of $1.3140.
"We have had a general upward trend in euro/dollar for quite
a while and people are looking at news in the euro zone like the
debt buyback by Greece," said Ulrich Leuchtmann, head of FX
research at Commerzbank.
Greece's buyback offer on Monday topped market expectations
and improved its chances of cutting its ballooning debt and
receiving long-delayed aid.
The dollar was hobbled by uncertainty over efforts to avert
the U.S. "fiscal cliff".
The White House dismissed Republican proposals for steep
spending cuts late on Monday, heightening concern that
lawmakers will not reach a deal in time to avert $600 billion in
automatic budget measures coming into effect in early 2013.
Despite the dollar's reputation as a refuge in times of
uncertainty, traders and analysts said it had stayed weak
because of positive developments in the euro zone.
The euro's rise helped push the dollar to a one-month low
against a basket of currencies, with its index dropping
Spain's formal request on Monday for European funds to
recapitalise its banking sector also supported the euro by
pushing down Spanish and Italian bond yields as investors became
more confident about buying euro zone debt.
Elsewhere, the Swiss franc weakened, extending Monday's
falls when Switzerland's largest banks said they would charge
for some franc deposits.
This pushed the euro to 1.21455 francs, its
highest since mid-September.
The dollar shed about 0.3 percent to 81.98 yen,
further from a 7-1/2 month high of 82.84 yen hit last month.
The yen's recent slide on prospects of further monetary
easing by the Bank of Japan after a Dec. 16 election has
stalled. Markets are waiting to see whether a new government,
likely to be led the opposition Liberal Democratic Party, can
implement policy changes proposed by LDP leader Shinzo Abe.
"The yen weakened because of Abe, but the short-term story
is over," said Kimihiko Tomita, head of foreign exchange for
State Street Global Markets in Tokyo.
"Abe has opened up many issues for discussion, but it
remains to be seen how many of them will come to pass."
The euro slipped about 0.1 percent to 107.17 yen,
off Monday's seven-month high of 107.67 yen.
The Australian dollar extended gains after the
Reserve Bank of Australia cut its main cash rate a quarter point
to 3.0 percent on Tuesday. A cut had been widely priced in. It
was last up 0.5 percent at $1.0472.