Euro falls versus dollar, yen on doubts over Greece deal

NEW YORK Wed Nov 28, 2012 3:09am IST

A man holds Japanese 10,000 Yen ($121) bank notes in front of a bank in Tokyo November 22, 2012. A 4 percent slide in the yen against the dollar in the last week and a half, driven by expectations that the Bank of Japan would take aggressive monetary policy under a likely new government, has increased the allure of long-suffering exporter shares and pushed Japanese stocks higher. REUTERS/Kim Kyung-Hoon

A man holds Japanese 10,000 Yen ($121) bank notes in front of a bank in Tokyo November 22, 2012. A 4 percent slide in the yen against the dollar in the last week and a half, driven by expectations that the Bank of Japan would take aggressive monetary policy under a likely new government, has increased the allure of long-suffering exporter shares and pushed Japanese stocks higher.

Credit: Reuters/Kim Kyung-Hoon

A statue of Ganesh, the deity of prosperity, is carried in a taxi to a place of worship on the first day of the ten-day-long Ganesh Chaturthi festival in Mumbai August 29, 2014. REUTERS/Danish Siddiqui

Ganesh Chaturthi Festival

During Ganesh Chaturthi idols will be taken through the streets in a procession accompanied by dancing and singing, and will be immersed in a river or the sea in accordance with Hindu faith.  Slideshow 

NEW YORK (Reuters) - The euro edged lower against the dollar and yen on Tuesday as optimism about a Greek debt deal gave way to worries about the lack of details in the plan.

Data showing U.S. consumer confidence at a four-year high also provided a modest boost for the dollar, though a looming budget crisis tempered optimism about the American economy and kept dollar gains in check.

The euro overnight notched a one-month high above $1.30 after euro zone finance ministers and the International Monetary Fund agreed to reduce Greece's debt, which paves the way for the release of emergency aid for the country.

But investors fretted over the lack of detail on a Greek bond buy-back, which has to be carried out before the IMF can release its share of aid in December. There was also concern about Athens' ability to meet its debt reduction targets.

"Market participants are not overly enthused by the tentative deal," said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston. "Questions persist about the proposed debt buyback. Against this backdrop, we are seeing renewed modest net selling of the euro."

The euro last traded at $1.2936, down 0.3 percent. Earlier it reached a one-month high of $1.3009, on Reuters data.

Against the yen, the dollar rose 0.1 percent to 82.15 yen after Japanese opposition leader Shinzo Abe, who is expected to become prime minister after next month's election, reiterated calls for bolder monetary policy and fiscal stimulus. The dollar hit a 7-1/2-month high of 82.82 yen last week.

The euro slipped 0.1 percent against the yen, to 106.31 yen.

Some traders booked profits after the Greek deal was announced, taking advantage of the euro's rise last week, its best weekly showing in more than two months.

"Investors who were buying on the rumor have been selling on the news," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut. "Month-end rebalancing is also playing a role today, with positioning in equities and bonds spilling over into the currency market."

ECONOMIC WOES IN EUROPE, FISCAL CONFUSION IN US

The dollar's direction in the coming weeks will be swayed by whether U.S. lawmakers reach a sweeping deficit reduction agreement by the end of the year. A deal needs to be done to avoid the "fiscal cliff" of tax increases and spending cuts due to take effect at the beginning next year.

The Congressional Budget Office has said that letting all the tax and spending changes come into force would thrust the U.S. economy back into recession.

Congress and the White House remain at odds on a deal, causing a level of uncertainty that typically boosts the appeal of the safe-haven dollar.

Federal Reserve Chairman Ben Bernanke said last week that 2013 could be a very good year for the U.S. economy, provided lawmakers avoid letting it sail over the fiscal cliff.

A spike in consumer confidence in November added to optimism and "shows there's more hope for the U.S. economy than for other developed ones," said Kathy Lien, managing director of BK Asset Management in New York.

Indeed, analysts said the euro would continue to struggle around $1.30 given the worsening economic outlook for the 17-country euro zone.

"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 solve," said Niels Christensen, FX strategist at Nordea.

He said a retreat to $1.2916, the euro's 55-day moving average, might bring some buyers back to the market.

(Additional reporting by Steven C. Johnson; Editing by Leslie Adler)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Coal Block Allocation

Coal Block Allocation

Government urges Supreme Court to not cancel some 'illegal' coal mines  Full Article 

Modi in Japan

Modi in Japan

Japan and India agree to boost strategic ties at summit  Full Article 

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Current Account

Current Account

Balance of payments surplus for third straight quarter  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage