* "Fiscal cliff" uncertainty dents growth-linked currencies
* Boehner fails to muster Republican support for his bill
* Thin year-end markets may exacerbate currency moves
By Nia Williams
LONDON, Dec 21 The euro fell and the yen firmed
against the dollar on Friday after talks to resolve a U.S.
budget crisis ground to a halt, fuelling concerns the world's
largest economy could be tipped into recession.
Republican lawmakers delivered a blow to their leader, House
of Representatives Speaker John Boehner, when they failed to
back an effort designed to extract concessions from President
Barack Obama in the "fiscal cliff" talks.
That threw into disarray attempts to reach an agreement to
avert $600 billion of tax hikes and spending cuts, due to kick
in within weeks.
Concern over the impasse dented demand for so-called
high-beta currencies that tend to rise or fall with the global
growth outlook, such as the euro and Australian dollar, and
lifted the highly liquid U.S. dollar and yen, which are seen as
"We have had a very good run in the euro and what we are
seeing at the moment is a little bit of profit-taking triggered
by disappointment in the fiscal cliff discussions," said Audrey
Childe-Freeman, head of FX strategy at BMO Capital Markets.
"This is a classic risk-off trading environment where the
yen did best, followed by the dollar, and higher-beta currencies
The euro hit a session low of $1.3180, before paring
losses to last trade down 0.4 percent on the day at $1.3195.
It retreated from an 8-1/2 month high of $1.33085 hit on
Wednesday after better German business confidence data triggered
buying in thin holiday markets.
Technical strategists cited support for the euro around
$1.3150, the 38.2 percent retracement of the move from the May
2011 high near $1.49 to the July 2012 low just above $1.24.
Many strategists said further losses for the euro and other
growth-linked currencies would be limited by expectations the
White House and Republicans will keep working towards some kind
of U.S. fiscal deal.
"I don't think either side wants to take the risk of seeing
the economy worsen and unemployment rise....Efforts will be made
to search for a compromise to limit the impact of the cliff,"
said Kimihiko Tomita, head of FX for State Street Global Markets
The dollar, which rose against a basket of currencies
, nonetheless dipped against the yen, falling 0.4
percent to 84.04 yen, pulling away from a 20-month high of 84.62
yen struck on Wednesday.
Traders trimmed some of their bets against the yen, which
has been pressured in recent weeks by expectations that a new
Japanese government, elected last weekend, will push the Bank of
Japan into more forceful monetary easing.
The euro fell 0.7 percent to 100.97 yen, down
from a 16-month peak of 112.59 yen set on Wednesday.
A sudden plunge in U.S. stock index futures as Boehner
cancelled a vote on his proposal also helped trigger a sell-off
in perceived riskier assets, said Jeffrey Halley, FX trader for
Saxo Capital Markets in Singapore.
The higher-yielding Australian dollar fell 0.4
percent to US$1.0443, its lowest level since Dec. 4, while the
New Zealand dollar dropped 0.6 percent t0 US$0.8285.