* U.S. Senate tax drama enters complicated endgame
* Sterling stronger on EU deal optimism (Updates prices, market activity; adds comments)
By Saqib Iqbal Ahmed
NEW YORK, Nov 30 (Reuters) - The dollar slipped to a four-day low against the euro on Thursday, hurt by selling pressure due to month-end adjustments, but rallied against the Japanese yen as U.S. Treasury yields rose on optimism about U.S. tax overhaul efforts.
The euro was 0.42 percent higher against the greenback to $1.1897, after climbing as high as $1.1931.
“The dollar is fading on month-end flows,” Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.
Market participants adjusting currency hedges for their portfolios were likely exerting selling pressure on the greenback, he said.
Against the Japanese yen, the dollar was 0.6 percent higher at 112.59 yen. Eric Viloria, currency strategist at Wells Fargo Securities in New York, attributed the greenback’s strength to buoyant U.S. Treasury yields.
“The 10-year Treasury yield is up today while Japanese 10-year government bond yield is up less than that, so the spread is moving in the more favorable direction for the U.S. dollar,” Viloria said.
U.S. Treasury yields rose sharply on news that Senator John McCain had endorsed the U.S. Senate tax bill, potentially easing challenges to its eventual passage in Congress.
“Expectations that the Senate will pass its version of the tax bill later today has given Treasuries a boost,” said Paresh Upadhyaya, director of currency strategy at Amundi Pioneer Investment Management in Boston.
Data on Thursday reaffirmed expectations for another Federal Reserve interest rate hike in December.
The number of Americans filing for unemployment benefits fell for a second straight week as labor market conditions tightened further.
U.S. consumer spending slowed in October, however, as the hurricane-related boost to vehicle purchases faded.
Underlying price pressures pushed higher for a second straight month, suggesting a recent disinflationary trend has run its course and bolstering expectations that the Fed will raise rates next month.
The dollar index, which measures the greenback against six rival currencies, was down 0.11 percent at 93.06.
The British pound strengthened on hopes Britain is close to a deal with the European Union over the Northern Ireland border.
The EU has named the border as one of three issues on which “sufficient progress” must be made before talks can move to negotiations on Britain’s future trade relationship with the bloc.
Sterling was up 0.86 percent at $1.3521. (Reporting by Saqib Iqbal Ahmed; Editing by Meredith Mazzilli)