* Euro falls, Greek deal provides only brief lift
* German lawmakers expected to pass deal on Friday
* Yen regains ground as investors unwind short positions
By Philip Baillie
LONDON, Nov 28 The euro fell on Wednesday on
worries about how a deal on Greek debt will be implemented and
concerns about whether U.S. lawmakers can agree a deal to avoid
the so-called fiscal cliff.
The yen, seen as a safe haven during times of economic
uncertainty, outperformed. It was also helped by investors
paring back aggressive expectations of monetary easing by the
Bank of Japan in coming months.
The euro fell 0.4 percent to $1.2890, as
institutional and Russian investors sold. Traders cited bids at
$1.2870 and $1.2850, which could check losses in the near term
with some attributing the euro's weakness to talk of dollar
demand for month-end portfolio adjustments.
The euro also fell to a 2-1/2 month low against the Swiss
franc, another safe haven, at 1.20305 francs on
trading platform EBS.
The single currency has fallen from a one-month high against
the dollar of $1.3010, struck after international lenders agreed
a plan to cut Greek debt earlier this week, allowing the country
to avoid a chaotic default.
But a lack of detail and growing scepticism over how Athens
will implement the reforms needed to reach the new targets made
investors wary of adding euros to their portfolios.
The deal is still subject to approval from German lawmakers,
which some say could weigh on the euro, although it is widely
expected to be approved on Friday.
"The discussion in Germany currently is that people are
aware this is not a long-term solution so most people know we
will have the same situation in a couple of months where they
have to decide to provide more funds or not," said Lutz
Karpowitz, currency analyst at Commerzbank.
"We might see some pressure on euro/dollar from German
lawmakers because we know that usually during a vote in
parliament the sceptics are out."
With the Greek deal out of the way analysts said investors
were focusing on the U.S. fiscal cliff - a combination of
automatic tax hikes and spending cuts due to kick in next year
that could tip the world's biggest economy into recession and
depress the global outlook.
The U.S. Congress pushed toward compromise on Tuesday on the
fiscal cliff, but agreement still appeared elusive.
"If (the U.S. talks) go well, the relief on peripheral
assets may have legs, including the euro. If it goes badly, even
France may get questioned by an uncertain market, and we would
expect the euro to suffer," Barclays strategists said in a note.
Comments by U.S. Senate Majority Leader Harry Reid about the
lack of progress by Democratic and Republican lawmakers also
fanned concerns, and added to demand for the dollar and yen.
YEN REGAINS GROUND
The yen rose as investors unwound long dollar and euro
positions built in recent weeks on expectations that a fresh
election on Dec. 16 will see a new Prime Minister elected who is
widely expected to put pressure on the Bank of Japan to ease its
ultra-loose monetary policy.
The Japanese currency had lost about 4 percent against the
dollar over the past two weeks as investors started to price in
a possible shift in monetary policy after the Japanese election.
Shinzo Abe, likely to emerge as premier, has called for more
aggressive easing, but some investors have begun to question how
much impact he will have on monetary policy.
"We've had some profit taking on the yen too, if you look
over the past few weeks the move has been very rapid to the
topside," said Saeed Amen, currency strategist at Nomura.
He added that comments by Abe on lower interest rates were
having a diminishing impact.
The dollar fell 0.3 percent to 81.89 yen, retreating
from last week's 7-1/2 month high of 82.84 yen. Market players
cited demand for the dollar at 81.70 yen and said this was
likely to check the Japanese currency's gains.
The euro also fell against the yen, dropping 0.7 percent on
the day to 105.64 yen, moving away from a seven-month
high of 107.135 yen set on Monday.