By William L. Watts and Wallace Witkowski, MarketWatch
SAN FRANCISCO (MarketWatch) -- The U.S. dollar slipped and the
euro regained its footing versus major rivals Wednesday after
euro-zone finance ministers and International Monetary Fund
officials once again failed to reach a deal on aid for Greece.
The ICE dollar index (DXY), which measures the U.S. currency
against a basket of six major rivals, eased to 80.937 in recent
action from 80.957 late Tuesday.
The euro fetched $1.2822, little changed from $1.2821 on
Tuesday, after having bounced off an intraday low of $1.2734 seen
on the heels of a meeting of euro-zone finance ministers and IMF
officials that lasted nearly 12 hours but broke up without an
agreement on how to deal with Greece. .
They will reconvene on Monday.
"If there is one moderately encouraging element it is that the
IMF is reported to have backed off slightly on its previous
insistence that the debt-to-GDP [gross domestic product] ratio be
on course for 120% in 2020, instead insisting on a more general
condition of debt being sustainable," said Adam Cole, head of G-10
foreign-exchange strategy at RBC Capital Markets in London.
"On balance, it is likely that some compromise will be reached
on Monday by a combination of increased debt duration and reduced
interest payments. However, should this not be the case, and with
time running out, the reaction in FX markets will be immediately
and substantially negative for risk and the euro," Cole wrote in a
note to clients.
The dollar, meanwhile, continued its march higher against what's
been a weakening Japanese yen , topping the ¥82 level for the
first time since early April as it pushed to ¥82.38 from
¥81.69.
Japanese data released Wednesday showed the economy posted its
largest trade deficit for October in more than 30 years as exports
to China continued to slump amid territorial tensions between Tokyo
and Beijing, underlining worries that Japan's headed for a
recession. .
The yen's been under heavy pressure of late amid expectations
the main opposition Liberal Democratic Party will prevail in
national elections next month. LDP leader Shinzo Abe has vowed to
push the Bank of Japan to further ramp up monetary easing in a bid
to battle deflationary pressures.
The LDP also wants to enact large-scale fiscal stimulus and to
boost military spending, noted Michael Derks, chief strategist at
FxPro in London, as Abe considers "dramatic measures for an economy
that frankly has been contracting for the past two decades."
In addition, if leaders in Washington get the U.S. fiscal house
in order--admittedly a big "if," Derks acknowledged in a
note--safe-haven demand for the yen would evaporate.
"As we have been arguing for some time, Japan desperately needs
a weaker currency. Further depreciation against the majors,
especially the dollar, looks likely," Derks wrote.
Also Wednesday, the British pound changed hands at $1.5938,
slightly up from $1.5927 in the prior session, after initially
trading in negative territory.
A larger-than-expected October budget deficit put the pound
under pressure, while calling into doubt U.K. Chancellor of the
Exchequer George Osborne's 2012-2013 borrowing target of 120
billion pounds ($190.8 billion).
Losses were cushioned, however, by what minutes of the November
meeting of the Bank of England's policy committee showed: that only
one member voted against the nine-person panel's decision to hold
the size of the quantitative-easing-oriented asset-buying program
steady at £375 billion, with the dissenter calling for a
£25 billion expansion.
The Australian dollar traded at $1.0353, down from $1.0389.
The WSJ Dollar Index , a measure of the U.S. currency against a
slightly broader basket, rose to 70.89, up from Tuesday's close of
70.77.
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