* Euro rises vs dollar to highest since November 2011
* Single currency hits 33-month high versus yen
* Fed meeting, U.S. growth data in focus
* Yen slide resumes, more losses in store
By Anooja Debnath
LONDON, Jan 30 The euro advanced to a 14-month
high against the dollar and 33-month peak against the yen on
Wednesday on improving prospects for the currency bloc, with
investors gearing up for more gains in the near term.
With euro zone economic sentiment rising for the third month
in a row, signalling improvement across sectors, and comments
from European Central Bank policymaker Ewald Nowotny about the
recovery seeping into the real economy, analysts said the recent
trend of euro strength could be maintained.
And given bets that U.S. fourth-quarter gross domestic
product data, due later in the day, will show growth slowing,
and the Federal Reserve will stick to its easy-policy stance,
the euro could edge up further against the dollar.
The euro hit a 14-month high of $1.3563, vaulting an
option barrier at $1.3500 on sustained demand from model and
macro funds, traders said. It was last up 0.4 percent on the day
The single currency rose to a 33-month high of
123.87 yen, breaking past a reported option barrier at 123.00
yen on expectations of further monetary stimulus from the Bank
of Japan. The euro has risen 8 percent against the yen this
"Right now the euro is certainly going to make some gains
against most of the G10 currencies on reasonably positive to
stable economic data and a central bank that seems to continue
to back the move in the euro without complaining about it," said
Peter Frank, FX strategist at BBVA.
Recent upbeat German data showed the euro zone's biggest
economy may be on a path of steady recovery, while signs
European banks may have turned the corner, after their first
repayment of loans taken from the ECB, have bolstered optimism
that the worst of the bloc's debt crisis has passed.
The euro's strength was more evident in the crosses,
especially against the yen. Investors, mainly from Japan, have
been keen to pour money into euro zone assets, pushing the euro
Analysts said the euro would edge higher as most other major
central banks, including the BOJ and the Fed, were pumping in
stimulus, but the ECB seemed unperturbed about the euro's steep
ECB Governing Council member Nowotny said on Wednesday that
the euro, while strengthening against the dollar and the yen,
was still within its long-term exchange rate band.
"The ECB is doing nothing to talk down the currency and
everything necessary to send it higher," Societe Generale
analysts said in a note.
FED IN FOCUS
The euro could also get a lift from the Fed's first policy
meeting of the year if the central bank maintains the status quo
and continues to stimulate the economy to reduce unemployment.
While that is likely to push the dollar lower against most
currencies, the U.S. currency is likely to hold its gains
against the yen.
The dollar hit a fresh 2-1/2 high at 91.41 yen, bolstered by
widening spreads between U.S. Treasury and Japanese government
bond yields. Traders reported an option barrier at 91.50 yen
which could cap gains in the near term.
Selling the yen has been mostly a one-way bet since
mid-November, based on expectations that Japanese Prime Minister
Shinzo Abe would push the BOJ into more aggressive monetary
easing to beat deflation.
"We have a forecast of 95 yen for this quarter but even that
could be exceeded given the pace of the current moves," said Ian
Stannard, head of European FX strategy at Morgan Stanley.
Some analysts said there was a small risk the dollar could
strengthen if the Fed sounded optimistic about the U.S. economy,
as this could hint some policymakers were against prolonged
"If we see some dissent against a very long period of
quantitative easing it could be dollar-friendly, though I think
it is too early for that to happen in this month's meeting,"
BBVA's Frank said.