FOREX-Euro hits 6-1/2 month peak vs yen, edges up on US dollar

Thu Nov 22, 2012 1:41am IST

* Prospects for Greek aid deal limits euro losses
    * Lenders to meet again next Monday to seek agreement
    * Dollar hits 7-1/2 month high vs yen, breaks above 82 yen
    * Euro crosses 105 yen for first time since early May

    By Gertrude Chavez-Dreyfuss and Daniel Bases
    NEW YORK, Nov 21 (Reuters) - The euro climbed to a
6-1/2-month high on the yen and rebounded versus the dollar in
choppy trading on Wednesday as comments by Germany's chancellor
spurred optimism European leaders will reach an agreement on
Greek funding.
    Europe's common currency dropped earlier after Greece's
international lenders failed to reach agreement on releasing
emergency aid as they haggled over how to reduce the country's
debt to a sustainable level. 
     The euro later trimmed losses after German Chancellor
Angela Merkel said she saw chances of a deal at a meeting of
European finance ministers on Monday. 
    "Perhaps the most important take-away from the failed talks
was that it appears to have spurred a tactical shift by
Germany," said Marc Chandler, global head of currency strategy
at Brown Brothers Harriman in New York. 
    "It seems more determined than it has been in making sure
that the Athens program remains intact."
    The yen, meanwhile, fell across the board on weak Japanese
export data and expectations of further monetary easing from the
Bank of Japan. It fell to a 6-1/2 month low against the euro and
a 7-1/2 month trough versus the dollar.
    The euro hit a peak of 105.82 yen, its highest
since early May. In afternoon New York activity it traded
slightly below the peak at 105.72 yen, up 1 percent on the day.
    Against the dollar, the euro was up slightly at 
$1.2825, off a session low of $1.2733.
    "It seemed there was a little more of a risk-on tone to the
market pushing the euro just that last 10-15 basis points higher
in the New York afternoon with word of the ceasefire with Israel
and Hamas," said Greg Anderson, G10 strategist at CitiFX, a
division of Citigroup in New York.
    An Egyptian-sponsored ceasefire came into effect on
Wednesday between Israel and the Islamist Hamas movement,
halting an eight-day conflict around the Gaza Strip that has
killed more than 140 Palestinians and five Israelis.
    U.S. markets are closed on Thursday due to the U.S.
Thanksgiving holiday.
    Camilla Sutton, chief currency strategist, at Scotia Capital
in Toronto expects the euro to trade in narrow ranges in the 
near term, closing the year around $1.27 and trending lower in
2013, possibly closing at $1.25.     
    The single currency has also been under pressure from recent
economic data showing the euro zone is in recession.
    Additional euro weakness stems from the uncertainty created
by Spain, which has yet to request the financial aid many in
markets think it needs. The country also faces a secessionist
threat from a regional election in Catalonia on Sunday.
 
    
    YEN STUMBLES
    The dollar rose as high as 82.53 yen, its strongest
level since early April as the main opposition Liberal
Democratic Party, tipped to win in a parliamentary election next
month, pledged to push for further easing by the BOJ.
 It last traded at 82.45, up 0.95 percent.
    The dollar broke through reported options barrier at 82 yen,
triggering stop-loss orders. It was the dollar's sixth
consecutive day of gains against the yen.
    The yen was also hurt by data showing Japanese exports
declined for a fifth month in succession, fanning concern the
country may be slipping into recession. 
    "Between a net trade and current account deficit, more money
is now flowing out of Japan, which is extremely negative for the
yen," said Kathy Lien, managing director of FX strategy at BK
Asset Management in New York.
    "In fact, it is so negative that it completely overshadowed
pre-positioning for the U.S. fiscal cliff."
    If the dollar ends the year above 76.90 yen, this would be
the first positive year for the currency pair in six years. Lien
said this has been caused entirely by weak Japanese
fundamentals.
    The Australian dollar also rose to a 7-1/2 month high of
85.48 yen.
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