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Dollar Declines as Lawmakers Express Optimism on Cliff

The Dollar Index fell for the first time in three days as comments from U.S. lawmakers fueled optimism the so-called fiscal cliff will be avoided.

The yen rose to a one-week high against the dollar as technical indicators signaled its recent decline may have been excessive. The euro erased losses against the greenback as stocks rebounded amid speculation investors will accept Greece repurchasing its own bonds at below market prices. Brazil’s real fell against all its major counterparts on speculation the central bank will keep interest rates at record lows.

“I expect it to be a headline-driven market -- encouraging headlines will see stocks rally and vice-versa -- but we are still many days until resolution,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The rally in dollar-yen has run its course. We’ve had a very large move in recent days.”

The Dollar Index fell 0.2 percent to 80.271 at 5 p.m. New York time. The gauge tracks the U.S. currency against those of six major trading partners.

The Japanese currency gained 0.1 percent to 82.08 per dollar time after touching 81.69, the strongest since Nov. 21. It has dropped 2.8 percent this month. The 17-nation euro was little changed at 106.31 yen, trimming its monthly gain to 2.9 percent. The euro rose 0.1 percent to $1.2957 and is little changed in November.

The shared currency weakened as much as 0.1 percent to 1.20305 Swiss francs, the lowest since Sept. 5. It has traded between 1.199 francs and 1.25 francs since the Swiss National Bank introduced a ceiling of 1.20 in September 2011 after the currency rose to a record, hurting exporters.

Boehner, Obama

Equities reversed declines as House Speaker John Boehner, an Ohio Republican, said he is optimistic lawmakers engaged in budget talks can “avert this crisis sooner rather than later.” He made his remarks to reporters, while saying he continues to oppose the expiration of tax cuts for top earners and Democrats need to get “serious” on budget cuts.

President Barack Obama said separately at the White House, “My hope is to get this done before Christmas.”

The Standard & Poor’s 500 Index rose 0.8 percent after declining as much as 1 percent. The 120-day rolling correlation between the euro-dollar pair and the S&P 500 has risen to 0.61 from a 2012-low of 0.39 in June. A reading of 1 indicates two assets move in lockstep.

Greek Plans

The euro pared earlier losses as Greece said it would unveil plans next week to tender for bonds issued in its 100 billion-euro ($129 billion) restructuring this year. The prices are “expected to be no higher than those at the close” on Nov. 23, euro-area finance ministers said yesterday. Those notes trade at about 29.5 cents on the euro, up from 28.1 percent last week, according to brokerage Exotix Ltd. in London.

The real weakened after economists surveyed by Brazil’s central bank said they expect policy makers to keep the target lending rate, known as the Selic, unchanged at a record low 7.25 percent through next year as the government seeks to spur economic growth. Brazil’s economy is forecast to grow 1.5 percent this year, the least since 2009.

Brazil’s currency fell 0.5 percent to 2.0935 per dollar. The next central bank meeting is Jan. 16.

The rand of South Africa, the continent’s biggest economy, gained against the euro even after central-bank Governor Gill Marcus told delegates of the National Union of Metalworkers of South Africa in Johannesburg today that fourth-quarter growth is “likely to be very low.” She said would be inappropriate to adjust interest rates at the moment.

The rand rose 0.2 percent to 11.4157 per euro and added 0.3 percent to 8.8194 per dollar.

‘Profit-Taking’

The seven-day relative strength index for the yen versus the dollar rose to 32 today after reading equal to or below the 30 level for nine days. A level of 30 indicates an asset may have declined too far, too quickly, and is due for a correction.

Futures traders added to bets the yen will decline against the dollar, Commodity Futures Trading Commission figures for the week ended Nov. 20 show. Net-short bets rose to 51,389 contracts, the most since April 27.

“We’ve had a very good run in the dollar-yen over the past few weeks -- we went all the way from 78 to 82 -- so you can expect some type of profit-taking,” said Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York.

Biggest Decliner

Japan’s currency has fallen 9 percent this year, the most among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro and the dollar are the next-worst performers, each losing 2.3.

The yen’s year-to-date losses accelerated last week as investors anticipated a victory for the political opposition, which favors more monetary easing, in a Dec. 16 election.

There is technical support to limit the yen’s strength versus the dollar at 81.70 to 81.40, Niall O’Connor, a New York- based technical analyst with JPMorgan Chase & Co., wrote to clients today. Remaining above 80.70 will maintain the yen’s weakening bias, he wrote.

To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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