Euro rises for fourth straight month against dollar

NEW YORK Sat Dec 1, 2012 3:21am 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

NEW YORK (Reuters) - The euro rose to its highest in more than five weeks against the dollar on Friday, posting its fourth straight month of gains as investors clung to hopes that U.S. politicians would reach a fiscal deal before the end of the year.

The yen slumped and registered its worst month since February against the dollar on speculation that a likely change in Japan's government would lead to aggressive monetary easing. Speculators boosted their bets against the yen to the highest since May, 2007. <IMM/FX>

For the past few weeks, financial markets have traded on headlines from U.S. political leaders on the "fiscal cliff," tax hikes and spending cuts worth $600 billion set to kick in early next year that could hurt the economy.

U.S. House of Representatives Speaker John Boehner said Republicans and President Barack Obama are locked in a stalemate. Obama blamed Republicans who control the House for holding up a deal.

"The market is sort of anticipating that some kind of a compromise will be reached before December 31. That's the mindset of the market right now," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York.

The euro rose 0.2 percent to $1.3001, having earlier touched $1.3027 on Reuters data, its strongest level since October 23. Traders reported offers at $1.3040-50.

For the month, the euro rose 0.3 percent against the dollar.

German lawmakers on Friday approved the latest Greek bailout by a large majority, also helping euro sentiment. But the outcome was widely expected.

Gains in Europe's shared currency came despite weak data that included a sharp drop in German retail sales, a fall in French consumer spending and record-high unemployment for the euro zone.

The gloomy economic outlook for the euro zone should limit further strength in the euro, analysts said.

"With unemployment still sitting at 11 percent in the euro zone and inflation at just 2 percent, I can't see how the euro can move up from here, other than people looking at an alternative to the dollar," said Chris Gaffney, co-chief investment officer at Everbank Wealth Management in St. Louis.

The euro dipped to session lows against the dollar after weak U.S. personal income and spending data. The data dented the market's risk appetite as investors sought the dollar for its safety appeal.

"The disappointing data has dampened the modest enthusiasm that major economies are gaining strength," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "The report also reinforces the fact that U.S. growth in Q4 would be weak."

The dollar rose 0.5 percent to 82.51 yen, close to a near eight-month high of 82.82 yen hit last week. It was on pace for a gain of 3.4 percent in November, the biggest since February.

The euro rose 0.6 percent to 107.19 yen. Earlier it climbed to 107.66, its highest since late April. Traders cited month-end demand for the euro from Japanese importers.

In November, the euro rallied 3.7 percent, the best month since June against the yen.

Although Japan's main opposition leader, Shinzo Abe, a front-runner to become the new prime minister, seemed to have softened his aggressive stance on Bank of Japan independence, he did reiterate his desire for the bank to buy foreign bonds.

"The market is gearing up toward the December 16 election," said Eliasson. He said with growing expectations of further easing, the dollar could rise further, to 85 to 87 yen, if the election goes as expected.

The dollar index .DXY ended the month of November up 0.3 percent after three straight months of losses.

(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)

  • Most Popular
  • Most Shared

Pending Reform

REUTERS SHOWCASE

Power Theft

Power Theft

India to invest $4 billion to tackle power theft  Full Article 

Debt Funds

Debt Funds

India monitors foreign flows into debt funds, may tighten rules  Full Article 

Bulgari Back in India

Bulgari Back in India

CEO: we shouldn’t have left India so we’re back  Full Article 

 Hindu "Modi-fication"

Hindu "Modi-fication"

Fears grow about Hindu "Modi-fication" of education  Full Article 

Weak Credit

Weak Credit

Hard to hit tax revenue target, credit weak - Jaitley  Full Article 

China Rate Cut

China Rate Cut

China surprises with interest rate cut to spur growth  Full Article 

Gold Imports

Gold Imports

RBI cautious on response to gold import surge  Full Article 

Economic Corridor

Economic Corridor

China commits $45.6 billion for economic corridor with Pakistan  Full Article 

Overseas Funds

Overseas Funds

RBI says overseas borrowed funds can be parked with banks in India  Full Article 

Reuters India Mobile

Reuters India Mobile

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