* Monti's offer to quit raises uncertainty over pro-euro
* Euro hurt by bleak German econ outlook, ECB rate cut
* Strong US job data supports dollar
* Dollar/yen may have downside after failed chart break
* Canadian dollar at 7-week high on data, takeover approval
By Hideyuki Sano
TOKYO, Dec 10 The euro flirted with two-week
lows against the dollar on Monday after Italian Prime Minister
Mario Monti offered to resign, raising political uncertainty
over who will lead the euro zone's third-biggest economy out of
the debt crisis.
In contrast, the dollar drew support from strong U.S. jobs
data last Friday, though caution about fresh easing steps from
the U.S. Federal Reserve later this week is curbing its advance.
"If Monti's pro-euro stance is to back off, that should
raise concerns about the euro," said Junya Tanase, chief
currency strategist at JPMorgan Chase in Tokyo.
The euro fell as much as about 0.3 percent to $1.2880
, near a two-week trough of $1.2876 set on Friday. It
last stood at $1.2908, down about 0.2 percent from late
Monti's surprise announcement at the weekend came a few days
after former Prime Minister Silvio Berlusconi abruptly withdrew
support for Monti's technocrat government, formed more than a
year ago in an effort to restore Italy's credibility with
An election is expected to be brought forward to February,
where, at the moment, the pro-European centre-left Democratic
Party is seen as having a strong advantage over an anti-Monti
front from Berlusconi and a new anti-establishment party, which
comes second in polls.
Germany's central bank on Friday warned that the euro zone's
biggest economy could soon enter recession, weighing on the
So did comments from a European Central Bank policymaker on
Friday that an interest rate cut was possible next year if the
euro zone economy does not pick up.
The bleak view contrasted with strong U.S. job data
published on Friday, which showed hiring by firms rose to
146,000 in November from 138,000 in October, defying predictions
of a blow from superstorm Sandy.
The U.S. unemployment rate also fell to a near four-year low
of 7.7 percent, though analysts cautioned that the fall was
partly due to decline in the labour participation rate,
suggesting some Americans were giving up job-hunting.
A big drop in U.S. consumer confidence took some shine off
the dollar, and the dollar's upside is also capped in the
lead-up to this week's Federal Reserve policy meeting.
Many economists think the Fed will announce on Wednesday
monthly bond purchases of $45 billion, signalling it will
continue to pump money into the U.S. economy during 2013 in a
bid to bring down unemployment.
"Despite a drop in the unemployment rate, we expect the Fed
to convert the expiring Operation Twist programme into an
outright purchase programme, with a purchase distribution
similar to the current programme," Barclays Capital analysts
wrote in a note.
Also not helping the dollar, there are few signs that
Washington policymakers are moving closer to averting tax hikes
and spending cuts set to take hold next year, which analysts say
could see the U.S. economy swing back into a recession.
President Barack Obama met with top Republican leader John
Boehner on Sunday to discuss ways to avoid the 'fiscal cliff',
but a resolution remained elusive.
Against the yen, the dollar was slightly weaker at 82.41 yen
. Its failure on Friday to break above last month's high
of 82.84 yen after the strong jobs data may not bode well for
the U.S. currency, some analysts said.
"The dollar did not rise despite rise in dollar bond yields.
With yen short positions already at a high level, the dollar
could fall quite fast," said JPMorgan's Tanase. U.S. regulator
data showed speculators' net yen short positions last week rose
to their highest level since mid-2007.
The yen showed no immediate reaction to Japan's revised
gross domestic product data, which showed the economy contracted
for two straight quarters. April-June GDP was revised down to a
small contraction of 0.03 percent while July-Sept figure was
unchanged from preliminary reading of 0.9 percent fall.
The Canadian dollar hit a seven-week high against the U.S
dollar, which fell to as low as C$0.9865, following
strong Canadian job data and the government's approval of the
takeover of energy company Nexen by China's oil giant
The Australian dollar slipped after China's November trade
numbers came in well below market expectations, with exports
rising an anaemic 2.9 percent and imports flat year-on-year.
But other China data published on Sunday was more upbeat,
with factory output and retail sales jumping to eight-month
highs in November, helping to support the Aussie.
The Aussie fell 0.1 percent to $1.0474, still not
far from a 11-week high of $1.0515 hit on Thursday.