* Euro gains on prospects of deal on Greece funding
* But disagreements between IMF and euro zone limit its rise
* Better signs on U.S. fiscal cliff lift riskier currencies
* Yen falls to 7-month low vs dollar on Japan easing worries
By Anooja Debnath
LONDON, Nov 19 The euro rose against the dollar
on Monday as optimism grew that deals may be in prospect on more
funding for Greece and on tackling the U.S. "fiscal cliff".
However, analysts said concerns about differences of opinion
between euro zone officials and the International Monetary Fund
may limit the euro's gains. Euro zone finance ministers are due
to meet on Tuesday to discuss Greece's debt problems.
The euro was up 0.2 percent at $1.2763, having
earlier hit a high of $1.2788. Traders said it may struggle to
vault last week's high of $1.28025 and chart resistance at its
200-day moving average around $1.2807.
European Central Bank policymaker Joerg Asmussen said on
Sunday the euro zone should agree on two years of funding for
Greece, while German Finance Minister Wolfgang Schaeuble said he
was banking on a deal on Tuesday.
But they may encounter opposition from the IMF, which wants
a permanent solution to Greece's debt problems.
"Hopes that maybe we will get better news out of Greece is
providing a little bit of support to the euro," Daragh Maher,
currency strategist at HSBC. "I am not supremely confident (of a
resolution being reached on Tuesday). The history of this
process has been one of delays."
But he said investors would not sell the euro aggressively
because the issue was still likely to be resolved at some point.
He added that a close above the 200-day moving average would
increase investor confidence in holding euros.
Optimism that U.S. lawmakers would overcome major fiscal
policy disagreement lifted equities and riskier currencies like
the euro. The higher-yielding Australian dollar rose
0.5 percent to $1.0391.
On Friday, Republican and Democratic congressional leaders
said they would be flexible in efforts to settle differences to
avert a $600 billion "fiscal cliff" of tax hikes and spending
Analysts at Morgan Stanley recommended buying the euro at
$1.2730, with a target of $1.33 and a stop at $1.2650.
They expected progress towards a compromise on the next
payment of funds for Greece, which should support the euro, and
that Spain would apply for a bailout, paving the way for the
European Central Bank to buy its bonds.
The dollar fell 0.2 percent at 81.14 yen, having hit
a seven-month high of 81.59 yen on trading platform EBS.
This marked its highest level since April 25 as the yen
extended recent falls on concerns the Bank of Japan would be
compelled to ease monetary policy further if an opposition-led
government came to power.
Investors sold the yen after elections were called for Dec.
16 and the leader of the opposition Liberal Democratic Party
called on the BOJ to print "unlimited yen" and set rates at zero
But investors were wary of pushing it much lower before a
BOJ policy announcement on Tuesday. most analysts expect it will
not announce additional monetary easing.
"It's most unlikely the BOJ will make major changes this
meeting, but the trend (for the yen) seems to be changing," said
Audrey Childe-Freeman, head of foreign exchange strategy at BMO
Traders cited stop loss buy orders at 81.75 and 82.00 yen,
with option barriers reported at those levels too. However, an
options expiry at 81.25 yen due later in the day may keep the
dollar close to that level.
The euro rose 0.2 percent against the yen to 103.78 yen
, having earlier hit a three-week high of 104.15 yen.
Some market participants said the yen may find support after
last week's 2.4 percent drop against the dollar -- the Japanese
currency's biggest weekly percentage drop in nine month --
though over the longer term it was expected to fall.