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FOREX-Euro pulls away from high as Greek deal relief fades
November 27, 2012 / 1:00 PM / 5 years ago

FOREX-Euro pulls away from high as Greek deal relief fades

* EU/IMF agree on new debt target for Greece
    * Euro falls from 1-month high as scepticism on deal grows
    * Yen weak after Japan opposition leader urges bolder

    By Anooja Debnath
    LONDON, Nov 27 (Reuters) - The euro retreated against the
dollar on Tuesday, surrendering initial gains on a deal to
rescue Greece as scepticism about the broader euro zone returned
to weigh on the single currency.
    The euro fell to a session low of $1.29350 on trading
platform EBS, well below a one-month high of $1.3010 struck
earlier during the Asian session when the Greek deal was agreed.
It was last trading at $1.2955, down 0.2 percent on the day.
    The dollar was also bolstered after Federal Reserve Bank of
Dallas President Richard Fisher, an arch-hawk, voiced concerns
about the U.S. Federal Reserve's quantitative easing programme
at a conference in Berlin. 
    Fisher's comments helped the dollar index recoup
losses. The index was last trading at 80.286, off a four-week
low of 80.022 struck earlier in the session when the euro was
    International lenders agreed on a package of measures to
reduce Greek debt by 40 billion euros, cutting it to 124 percent
of gross domestic product by 2020, in a deal that paves the way
for the release of urgently needed loans to keep Greece's
economy afloat. 
    Analysts however said the Greek deal would provide a
temporary relief and the worsening economic outlook for the euro
zone under relentless austerity measures would keep the euro
under pressure, especially against the dollar.
    "The initial reaction was positive for the euro as at first
people were relieved that an agreement had been reached but
looking at the details sentiment has turned a bit sour," said 
Niels Christensen, FX strategist at Nordea.
    "The problem for Greece might be solved for the moment but
there are bigger problems like Spain, and with the dire growth
outlook for the euro zone, that will be very difficult to
    Christensen also said the euro's failure to move decisively
above $1.30 might have triggered some profit taking on long
euro/dollar positions. This could wind back the single
currency's recent gains. Near-term support for the euro lay at
its 55-day moving average of $1.29187.
    The euro had risen nearly 2 percent against the dollar in
the past two weeks, supported by expectations for a deal on
Greece and also due to optimism that U.S. lawmakers would reach
an agreement to avoid the 'fiscal cliff' of tax increases and
spending cuts due to take effect next year.
    Japan's opposition leader, Shinzo Abe, the country's likely
next prime minister after an election next month, reiterated
calls for bolder monetary and fiscal stimulus to revive the
country's economy. 
    That is likely to keep the yen under pressure, despite its
slight recovery on Tuesday. It was higher against the euro
 and flat against the dollar.
    The dollar was trading at 82.10 yen, up 0.1 percent
on the day and off a 7-1/2 month high of 82.84 yen hit last
    The Japanese currency has fallen sharply over the past
couple of weeks on mounting speculation that a new government
after Dec. 16 general elections will coerce the Bank of Japan
into easing monetary policy aggressively. 
    "We have seen a bit of a dip in dollar/yen this morning but
in the medium term we remain bullish. I would view dips as
opportunities to buy rather than something more permanent," said
Saeed Amen, quantitative FX strategist at Nomura. He expects
dollar/yen to be at around 85 yen by mid-2013.
    Data from the U.S. Commodity Futures Trading Commission
showed that currency speculators increased their bearish bets
against the yen in the week ended Nov. 20, a period when the
Japanese currency began its slide.

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