* Yen gains on dollar, euro as positions unwound
* Euro support seen at $1.2918 55-day moving average
* Some see yen’s long-term downtrend intact
By Lisa Twaronite
TOKYO, Nov 28 (Reuters) - The yen soared and the euro moved away from the previous session’s one-month high against the dollar in Asian trading Wednesday as investors’ relief about a new debt target for Greece turned to unease over the looming U.S. fiscal crisis.
The U.S. Congress pushed toward compromise on Tuesday on the “fiscal cliff” of tax increases and spending cuts due to take effect from early next year, but an agreement still appeared elusive despite growing pressure from American business interests for action.
Comments by U.S. Senate Majority Leader Harry Reid on Tuesday about the lack of progress by Democratic and Republican lawmakers also fanned concerns.
Investors unwound long dollar and euro positions against Japan’s currency. The yen 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 Japan’s Dec. 16 election. Shinzo Abe, likely to emerge as the country’s next leader, has called for more aggressive easing.
“Worries about the U.S. fiscal cliff have increased, while the effects of the ‘Abe trade’ have faded for now,” said Masashi Murata, senior forex strategist at Brown Brothers Harriman. “The market wants to see what the Bank of Japan actually does,” he said.
Disappointment about the lack of details in the Greece deal added to pressure on the euro. While international lenders agreed on a plan to cut Greek debt, which will allow the country to secure more financial aid and avoid a chaotic default, market scepticism grew over a lack of detail on how Athens will implement the reforms needed to meet its new targets.
“The purpose of the meeting was supposed to have been not to just give Greece additional funding, but to consider the evidence that Greece deserved to receive additional funding,” said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
“This purpose was not fulfilled, which is why the euro buying has halted,” he said.
Europe’s “muddle-through approach” on Greece threatens to amplify the outcome of the U.S. fiscal talks on the euro, strategists at Barclays wrote in a note to clients on Wednesday.
“If they go well, the relief on peripheral assets may have legs, including the euro. If it goes bad, even France may get questioned by an uncertain market, and we would expect the euro to suffer,” they said.
The euro had been in a rising trend against the dollar since last week, as investors’ hopes rose that a deal on Greece would be reached and that U.S. lawmakers would make progress on addressing the fiscal impasse. The single currency rose as high as $1.3010 on Tuesday on trading platform EBS, its highest level since late October.
The euro was down about 0.2 percent in Asia at $1.2920, after earlier breaking below support at its 55-day moving average at $1.2918. Support was also cited at the 38.2 percent Fibonacci retracement of its recent rally at $1.2877.
The European unit also skidded 0.6 percent to 105.69 yen , moving away from a seven-month high of 107.135 yen set on Monday. Stop-loss orders were said to be placed around 105.50 yen.
The dollar dropped about 0.4 percent to 81.81 yen, moving away from a 7-1/2 month high of 82.84 yen reached last Thursday.
The dollar got no help from starkly diverging messages from U.S. Federal Reserve officials on Tuesday. Charles Evans, president of the Chicago Federal Reserve and one of the Fed’s most outspoken doves, said interest rates should stay near zero until the jobless rate falls to at least 6.5 percent.
But Dallas Fed President Richard Fisher said the U.S. central bank needs to not set a limit on the amount of assets it is willing to buy.