* Euro near four-week highs vs USD
* Markets hopeful of an aid deal for Greece
* Resumption of U.S. fiscal cliff talks also eyed
By Ian Chua
SYDNEY, Nov 26 The euro started the week near
one-month highs against the dollar, having staged an impressive
rally on hopes that Greece will finally secure more emergency
loans to keep it afloat.
Euro zone finance ministers meet on Monday for a third time
in as many weeks to hammer out a deal to get international
lenders to release aid to Greece before debt repayments due
Germany Chancellor Angela Merkel said she was confident a
deal could be reached, while the French finance minister said an
agreement was close.
The euro bought $1.2972, not far off Friday's peak of
$1.2991, a high not seen since late October. Against the
downtrodden yen, the common currency was at 106.85,
having scaled a seven-month high around 106.98 on Friday.
"There is optimism around in regards to the euro area's
ability to achieve a deal on Greece," said Emma Lawson, senior
currency strategist at the National Australia Bank, adding
further upside in euro/dollar was likely.
With the euro on the front foot, the dollar index
languished near a three-week trough of 80.128 plumbed on Friday.
There was little reaction so far to news that separatist
parties in Spain's Catalonia looked set to win a majority in
regional elections. Growing separatism is a huge challenge for
Spanish Prime Minister Mariano Rajoy, who is trying to bring
down painfully high borrowing costs by persuading investors of
Spain's fiscal and political stability.
Investors continued to make short shrift of the yen on
expectations of bolder stimulus to spur Japan's economy. The
country's opposition party, tipped to win next month's election,
has called for radical monetary stimulus to beat deflation.
The dollar bought 82.35 yen, near an eight-month high
around 82.84 set last week.
Dealers warned much of last week's action occurred in thin
trading conditions due to holidays in the United States and
Japan and could easily be unwound.
Still, analysts at BNP Paribas believed the market's
'risk-on' mode could continue if a Greek aid deal was indeed
finalised and the United States made progress on its own fiscal
"Although a swift deal is probably too optimistic, we
believe an eventual compromise will be achieved well before the
end of the year," they said of the U.S. 'fiscal-cliff' talks,
adding they expected the Federal Reserve to expand its
quantitative easing programme at its December meeting as well.
"(This) combination of positive developments should, in our
view, maintain this risk momentum over the coming weeks."
Commodity currencies, usually bought in times of strong risk
appetite, made the most of the upbeat market sentiment.
The Australian dollar rallied more than 1 percent
last week and was last at $1.0460, not far off this month's high
of $1.0480. A break there could see it aim for the September
peak of $1.0625.
There is not much in terms of major economic news out of
Asia on Monday, leaving the focus squarely on euro area talks to
The White House and Congress are also set to resume
negotiations this week to avoid a series of automatic tax hikes
and spending cuts worth $600 billion set for January, which
analysts fear could tip the world's biggest economy into