November 20, 2012 / 3:32 PM / 5 years ago

FOREX-Dollar hits 7-month high vs yen, euro still under pressure

* Dollar hits seven-month high after BOJ holds policy

* Euro under pressure after slip on French rating cut

* Euro zone finance ministers meet to discuss Greek aid

By Julie Haviv

NEW YORK, Nov 20 (Reuters) - The dollar leaped to a seven-month high versus the Japanese yen on Tuesday and edged higher against the euro as optimism that euro zone ministers would release funds for Greece was undercut by a downgrade to France’s credit rating.

The dollar gained in value against the yen for a fifth straight session and is up 2.3 percent so far in November, largely due to on expectations that a new Japanese government after a Dec. 16 election could push the Bank of Japan toward more forceful monetary stimulus.

That stance stems from recent comments made by Shinzo Abe, the leader of Japan’s opposition Liberal Democratic Party and a frontrunner to win the election.

The BoJ, however, held off from additional monetary stimulus at its latest policy meeting, as expected, after having eased policy in September and October.

The dollar rose as high as 81.72 yen, its highest since April 20. It last traded at 81.58, up 0.2 percent on the day, according to Reuters data.

The euro, meanwhile, edged lower against the dollar as investors fixated on a euro zone finance ministers meeting.

The finance ministers are likely to approve the next tranche of loans to Greece although the money is unlikely to be disbursed before December and a deal on debt reduction may need further talks.

“Comments heading into today’s meeting are generally hopeful, and even if a formal decision to release funds is not reached today, ministers could reach a consensus on the key parameters of any deal,” said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.

“Accordingly, we see the Eurozone finance ministers meeting as a market-positive rather than market-negative event, with some potential for the euro and other foreign currencies to move higher today.”

The euro last traded at $1.2798, down 0.1 percent on the day, paring earlier losses after ratings firm Moody’s stripped France of its triple-A status late on Monday.

Some analysts said the cut did not come as a surprise after Standard & Poor’s downgraded France in January, and the finance ministers meeting could have a bigger impact on the euro if policymakers fail to meet market expectations.

“The main driver in terms of the news flow was the downgrade of France overnight but the knee-jerk reaction we saw overnight was very short lived,” said Michael Sneyd, FX strategist at BNP Paribas.

“That tells us the downgrade was not a surprise...The focus today is the Eurogroup meeting and there we are looking for some reasonable progress to be made for Greece’s next aid tranche.”

He said he was looking for progress on Greece to help the euro consolidate above $1.28, adding it could reach $1.30 if U.S. policymakers agree a solution to avert $600 billion of tax hikes and spending cuts, dubbed the “fiscal cliff”.

Some investors were wary after Finland’s finance minister, Jutta Urpilainen, said she was unsure Greece’s next loan tranche would be approved at the meeting.

The dollar, meanwhile, showed little reaction to data showing U.S. housing starts rose to their highest rate in more than four years in October.

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