Daily Forex Round-Up: The Single Currency (EUR) Benefiting from US Optimism

on Nov 29, 2012

November 29 proved to be a good day for the euro, with the single currency rising for a second day in a row against the greenback, as reported by Reuters. The euro was supported by optimism over the US fiscal cliff, as well as by positive domestic news. The US dollar however dropped versus the majority of its counterparts, with the most notable exception being the yen.

**Euro Up for a Second Straight Day**
Reuters reports that the euro was up 0.3 percent against the greenback in early New York trading on November 29. The single currency traded at $1.2993, close to a one-month high of $1.3010 reached on Tuesday. The euro benefitted from comments by US policymakers who voiced their optimism that the US fiscal cliff could be averted. Domestic concerns about Greece were also tempered by the news that Italy’s 10-year borrowing costs hit a two-month low.

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“News flow has generally been positive, between progress towards a resolution of the US fiscal cliff, falling European bond yields (…) and European fundamental data turning more positive,” commented Camilla Sutton, chief currency strategist at Scotia Capital, as quoted by Reuters. Some analysts, however, see the euro as vulnerable to economic data and Greek deal concerns. Reuters quotes Steve Barrow, head of G10 currency research at Standard Bank as saying that apart from “the possibility of Spain seeking a bailout, which would be euro-positive, there is a greater potential for downside surprises for the euro related to the Eurozone economy.”

**Dollar Declines on US Budget Deal Hopes**
!m[Greenback (USD) Declines On Improved Risk-On Mood](/uploads/story/935/thumbs/pic1_inline.png)The US dollar, which is a traditional haven currency, declined on improved risk sentiment. Bloomberg reports that the dollar index, the gauge tracking the greenback’s performance against the currencies of major US trading partners, declined for a second day, dropping 0.3 percent to 80.100. “We’re seeing investors look to put on risk and sell the dollar,” points out Michael Sneyd, a currency strategist at BNP Paribas SA (EPA:BNP) as quoted by Bloomberg. “We expect there will be a resolution to the fiscal cliff over the next couple of weeks.”

In addition to fiscal cliff optimism, data showing that US domestic product grew at a 2.7 percent annual rate, up from a 2 percent prior estimate, also fuelled appetite for riskier assets.
The dollar, however, posted an advance against the yen, with the Financial Times reporting that the greenback rose by more than 0.1 percent to ¥82.23. The yen, which also has a haven currency reputation, is suffering from speculation of potential unlimited monetary easing by the Bank of Japan if opposition party leader Shinzo Abe becomes the next prime minister following the upcoming election in December.

**Rouble, Loonie Boosted by Crude Oil Advance**
On November 29, Bloomberg reported that Canada’s dollar, the loonie, advanced to an almost three-week high versus its US counterpart. The loonie was boosted by US fiscal cliff optimism as well as by the performance of crude oil, Canada’s largest export. Oil, which rose 1.2 percent to $87.53 per barrel in New York, also lifted Russia’s rouble, which posted a 0.9 percent gain against the dollar.


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