MarketWatch | Currencies | Dollar in Focus -November 19, 2012--: Dollar extends loss as cliff hopes boost stocks

By Deborah Levine 

SAN FRANCISCO (MarketWatch) — The dollar lost ground Monday, coming off its highest level against a basket of currencies since early September, as investors grew cautiously upbeat over efforts to avert the so-called fiscal cliff and stifled the currency’s haven-related support.

The ICE dollar index , which measures the U.S. unit against a basket of six major currencies, fell to 80.837 from 81.286 late Friday. The index rose 0.5% last week. Read: Dollar at 2-month high.
“I am confident we can get our fiscal situation dealt with,” President Barack Obama told a news conference Sunday in Bangkok, where he started a three-nation Asian trip. See: Obama and Pelosi hopeful on budget deal.

Global equities traded solidly higher to begin the week and U.S. stocks followed suit, with investors citing encouraging, albeit vague, remarks from key players in the Washington talks. Wall Street extended gains after better-than-expected U.S. housing data. Read: U.S. stocks rise after housing data.
“Hope that U.S. politicians can avoid the fiscal cliff has been gaining traction over the weekend,” said Jane Foley, senior currency strategist at Rabobank International.

After a Friday meeting at the White House, top congressional Republicans and Democrats alike emerged upbeat on prospects for averting the automatic round of billions in tax hikes and spending cuts due to take effect in January. Economists fear the measures could eventually drag the U.S. economy back into recession unless politicians reach a budget deal.

Overall activity this week will likely be light and potentially choppy, with U.S. markets closed Thursday for the Thanksgiving Day holiday, strategists said. U.S. bond markets also have a shortened session on Friday.
The euro rose to $1.2813 from $1.2624 late Friday.
The British pound traded at $1.5912, up from $1.5882.

Tuesday meeting on Greece

The euro, and overall risk appetite, may be vulnerable to developments surrounding Greece.
For the second time in two weeks, euro-zone finance ministers will meet Tuesday in an effort to overcome differences with the International Monetary Fund over how to get Greece’s debt load back on a sustainable track.
“While [finance ministers] may attempt to contain the Greek question tomorrow, the issue of IMF acceptance and the funding of the deficit maturity extension remain uncertain,” leaving euro rallies “worth fading,” said Jeremy Stretch, strategist at CIBC.
He expects the euro to reverse back toward the 100-day moving average at $1.2650. On a technical basis, resistance is seen at the 200-day moving average at $1.2808, analysts said.

Focus remains on yen

Against the yen, the dollar gave back some ground after touching a six-month high on the Japanese currency last week as Shinzo Abe, seen as likely to become Japan’s next prime minister, repeated a vow to push the Bank of Japan to be more accommodative. See: Jaw mightier than printing press for yen bears.
The dollar pared its decline to buy 81.18 yen, little changed from ¥81.19 late Friday.
Abe is the leader of the main opposition Liberal Democratic Party. Elections are scheduled for Dec. 16.
In the midst of that, the Bank of Japan policy makers are meeting. When the two-day meeting ends Tuesday, analysts will be watching closely for signs that further monetary easing from the central bank is in the works or not. See: Bank of Japan under watch for easing clues.
Also Monday, the Australian and Canadian dollars gained some ground as the IMF will soon formally classify both dollars as official reserve assets, which over time could have a significant impact on global bond and equity markets. See: Aussie, Canada dollars termed reserve currencies.
The Australian dollar rose to $1.0406 from $1.0325, while the U.S. unit fell 0.5% to buy 99.66 Canadian cents.