The euro hit a one-month high versus the
dollar on Tuesday after a deal on a new debt target for Greece but the gains
proved fleeting as an agreement had been largely priced in, and some analysts
said the single currency could start to lose momentum.
The yen slipped after Japan's opposition
leader and likely next prime minister after an election next month reiterated
calls for bolder monetary and fiscal stimulus to revive the country's economy.
In a breakthrough to release urgently
needed loans to keep Greece's near-bankrupt economy afloat, 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.
The euro rose to as high as $1.3010 on
trading platform EBS, its highest level since late October. It later trimmed
its gains and last stood at $1.2987, steady from late U.S. trade on Monday.
"It was not a huge reaction because
(the deal) was already priced in," said Joseph Capurso, a strategist at
Commonwealth Bank of Australia, adding that the euro could ease by around a
cent by the end of the week.
"Economic data in Europe is getting
worse and you also have the unresolved U.S. fiscal cliff in the
background," he said.
The euro had pushed higher against the
dollar over the past week, supported by hopes for a deal on Greece and also due
to optimism that U.S. lawmakers will reach an agreement to avoid the 'fiscal
cliff' of tax increases and spending cuts due to take effect next year.
Republicans and Democrats were still at
odds, however, as Congress returned from its Thanksgiving holiday break.
WEAKENING YEN
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 force the Bank of Japan to ease monetary
policy aggressively.
Shinzo Abe, the leader of Japan's
opposition Liberal Democratic Party, said the Bank of Japan must set a 2
percent inflation target, adding that its current "goal" of 1 percent
is not enough.
The euro rose 0.3 percent versus the
Japanese currency to 106.83 yen, bringing it closer to a seven-month high of
107.135 yen that had been set on Monday.
The dollar edged up 0.2 percent to about
82.24 yen, moving back towards a 7-1/2 month high of 82.84 yen hit last Thursday.
Data from the U.S. Commodity Futures
Trading Commission shows 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.
"In the short-term, until elections, I
think dollar/yen should stay a bit firm," said Roy Teo, FX strategist for
ABN AMRO Bank in Singapore, adding that the dollar might test the year-to-date
high of 84.187 yen set in mid-March.
Still, the dollar's rally against the yen
may not prove very durable since U.S.-Japan interest rate differentials remain
small, Teo said.
"We may see dollar/yen head towards
this year's high...But I don't see it as a sustainable move," he added.
The yield advantage of two-year U.S.
Treasuries over two-year Japanese government bonds is now very minor, at about
17 basis points, and has eased from about 21 basis points in early November.
That suggests that Japanese investors have
limited incentives to invest in Treasuries while taking on foreign exchange
risk.
No comments:
Post a Comment