The yen held steady below a one-week high versus the dollar on Thursday, while the euro found some support as comments from US policymakers rekindled hopes of a deal to avert a sharp fiscal tightening. "For the moment, the US fiscal cliff seems to be a dominant theme in the market," said Katsunori Kitakura, associate general manager of market-making at Sumitomo Mitsui Trust Bank.
US House Speaker John Boehner, the top Republican in Congress, voiced optimism that Republicans could broker a deal with the White House to avert a fiscal crisis, even though he repeated his opposition to raising income tax rates on high earners. President Barack Obama said on Wednesday he hoped to reach an agreement with Congress before Christmas. Investors fear the planned tax increases and spending cuts due to start at the beginning of next year totalling about $600 billion could tips the world's biggest economy into recession and depress the global economic outlook.
The dollar held steady versus the yen from late US trade on Wednesday at 82.08 yen, having bounced from Wednesday's one-week low of 81.68 yen. Expectations of big month-end dollar/yen bids helped lend support to the dollar, which had been in a corrective decline after hitting a 7 1/2-month high of 82.84 yen last week. The yen has come under pressure over the past couple of weeks due to market speculation about the chances of aggressive monetary easing in Japan following a likely change in government next month.
Main opposition leader Shinzo Abe, a front-runner to become prime minister after the December 16 election, has called for radical change in monetary policy, including unlimited easing, sparking a four-percent fall in the yen earlier this month.
The dollar is likely to trade in a 81.00 yen to 83.00 yen range ahead of Japan's election, said a trader for a Japanese bank in Singapore. "Dollar/yen continuing to see some short-term players building on longs," the trader said, adding that most market players he had contact with were expecting that sort of range for now. The euro traded at about $1.2953 steady from late US levels and above Wednesday's low of $1.2880, supported by improved risk appetite due to revived optimism over the US fiscal cliff negotiations. Against the yen, the euro changed hands at 106.33 yen, flat on the day and not far from a seven-month high of 107.135 yen hit on Monday.
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