* Euro support seen at $1.2918 55-day moving average
* Dollar drops vs yen but some see long-term uptrend
By Lisa Twaronite
TOKYO, Nov 28 (Reuters) – The euro moved away from the
previous session’s one-month high against the dollar in Asian
trading Wednesday as investors’ relief about a new debt target
for Greece turned to unease over the looming U.S. fiscal
crisis.
While international lenders agreed on a plan to cut Greek
debt, which will allow Greece to secure more financial aid and
avoid a chaotic default, market scepticism grew over a lack of
detail on how Greece will implement the reforms needed to meet
the new targets.
“The purpose of the meeting was supposed to have been not to
just give Greece additional funding, but to consider the
evidence that Greece deserved to receive additional funding,”
said Kimihiko Tomita, head of foreign exchange for State Street
Global Markets in Tokyo.
“This purpose was not fulfilled, which is why the euro
buying has halted,” he said.
The European unit was also pressured by concerns about the
U.S. “fiscal cliff” of tax increases and spending cuts due to
take effect from early next year. The U.S. Congress pushed
toward compromise on Tuesday but an agreement still appeared
elusive, despite growing pressure from business interests for
action.
Comments by U.S. Senate Majority Leader Harry Reid on
Tuesday over the lack of progress among Democratic and
Republican lawmakers also fanned investors’ concerns.
“The muddle-through approach in Europe may amplify the
outcome of the U.S. fiscal cliff discussions,” strategists at
Barclays wrote in a note to clients on Wednesday.
“If they go well, the relief on peripheral assets may have
legs, including the euro. If it goes bad, even France may get
questioned by an uncertain market, and we would expect the euro
to suffer,” they said.
The euro had been in a rising trend against the dollar since
last week, as investors’ hopes rose that a deal on Greece would
be reached and that U.S. lawmakers would make progress on
addressing the fiscal impasse. The single currency rose as high
as $1.3010 on Tuesday on trading platform EBS, its highest level
since late October.
The euro was down about 0.1 percent in Asia at
$1.2934, with support cited at its 55-day moving average, now at
$1.2918, and also at the 38.2 percent Fibonacci retracement of
its recent rally at $1.2877.
The European unit also skidded 0.4 percent to 105.92 yen
, moving away from a seven-month high of 107.135 yen
set on Monday.
The dollar dropped about 0.3 percent to 81.89 yen,
moving away from a 7-1/2 month high of 82.84 yen hit last
Thursday.
The dollar got no help from starkly diverging messages from
U.S. Federal Reserve officials on Tuesday. Charles Evans,
president of the Chicago Federal Reserve and one of the Fed’s
most outspoken doves, said interest rates should stay near zero
until the jobless rate falls to at least 6.5 percent.
But Dallas Fed President Richard Fisher said the U.S.
central bank needs to not set a limit on the amount of assets it
is willing to buy.
The yen lost about 4 percent against the dollar over the
past two weeks, and some market participants say it was ripe for
a correction.
But some still believe that a longer-term trend of yen
weakness has already begun, as investors have started to price
in a possible game-changing shift in monetary policy after
Japan’s Dec. 16 election, as the likely winner favours
aggressive easing.
