November 14, 2012 / 8:21 PM / 5 years ago

FOREX-Euro rises on Spain, Greece hope; yen tumbles

* Euro on track for best day in two weeks vs dollar
    * Rehn says Spain has taken effective action for 2012, 2013
    * Japan PM Noda open to dissolving parliament on Friday


    By Wanfeng Zhou
    NEW YORK, Nov 14 (Reuters) - The euro edged higher against
the U.S. dollar on Wednesday, snapping a five-day losing streak,
as worries about Spain and Greece eased temporarily and after
some Federal Reserve officials discussed the need for more bond
buying.
    The yen fell the most against the dollar and euro in two
months after Japanese Prime Minister Yoshihiko Noda said he was
ready to dissolve the lower house of parliament later this week
and hold a snap election next month. 
    European Union Economic and Monetary Affairs Commissioner
Olli Rehn said Spain has taken effective action to address its
budget deficits in 2012 and 2013, even though budget steps for
2014 fell short of expectations. 
    His comments gave a further lift to the euro, which had
pared losses on Tuesday after a German government source said
Greece may receive aid worth roughly 44 billion euros ($55.93
billion) in a single tranche.
    "The better-than-expected news from policymakers in Europe
pertaining to Germany's positive disposition to extending Greece
additional fiscal flexibility has certainly helped a lot in
terms of placating investors' angst," said Ravi Bharadwaj,
pricing and market analyst at Western Union Business Solutions
in Washington.
    The euro rose 0.4 percent to $1.2749, on track for
its best day in two weeks. But sentiment on the currency
remained fragile, analysts said, as the International Monetary
Fund and the euro zone remain at loggerheads over how Athens
should bring its debt down to a sustainable level.
    The euro zone currency briefly jumped to a session peak of
$1.2777 after the minutes of the Federal Reserve's October
meeting showed a number of Fed officials thought the U.S.
central bank would need to step up asset purchases next year 
when the Fed's Operation Twist program expires. 
    On Tuesday, the Fed's influential vice chair, Janet Yellen,
said U.S. interest rates may need to stay near zero until early
2016 to boost employment forcefully. 
    Against the yen, the euro rallied 1.4 percent to 102.18
 yen. The dollar gained 1 percent to 80.16 yen.
    Japan's main opposition Liberal Democratic Party (LDP),
which favors further monetary policy easing by the central bank,
leads in opinion polls and the prospect of an early election is
regarded as negative for the yen. 
    LDP leader Shinzo Abe called on the central bank on
Wednesday to print "unlimited yen" to achieve a new inflation
target. 
    Japanese Prime Minister Noda told parliament he would be
willing to dissolve the lower house on Nov. 16 and hold
elections in December if the opposition agreed to pass reforms
to the electoral system. 
    The prospect of further Fed easing could limit the dollar's
gains. Earlier, data showed U.S. retail sales fell in October,
while producer prices unexpectedly weakened last month.
 
    "This morning's economic reports paint a picture of a slow
and struggling U.S. recovery that will require continued
stimulus from the Federal Reserve," said Kathy Lien, managing
director of FX strategy at BK Asset Management in New York.
    Sterling hit a more than two-month low against the dollar
 at $1.5839 after the Bank of England's inflation report
painted a gloomy outlook for the UK economy and governor Mervyn
King said quantitative easing could still be restarted.
 
    The pound was last down 0.1 percent at $1.5852.

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