Euro edges up in Asia

The euro edged up against the dollar on Tuesday, consolidating the gains made the previous day on hopes that European officials will finally make some progress in tackling their debt crisis this week. But ever conscious that policymakers can easily disappoint yet again, markets will be hard pressed to keep pushing the common currency higher in the absence of concrete action, traders said.
There was little reaction in Asia to news Fitch had cut the credit outlook for the United States to negative, though it expected no move on the actual rating until late 2013. The euro also showed limited reaction to a report on French newspaper La Tribune's website saying Standard & Poor's could change the outlook for France's triple-A rating to negative within the next 10 days.
The single currency rose 0.4 percent to $1.3366. The euro had risen to a high of $1.3399 on Monday even after the IMF firmly denied an Italian newspaper report it was in talks to bail out Italy. Traders said markets were simply looking for an excuse to cut bearish positions on the euro and commodity currencies, after going short risk ahead of the US Thanksgiving holiday. The euro had dropped some 7 percent from the October 27 peak of $1.4248 to a trough near $1.3213 on Friday.
"We remain cautious as the market remains vulnerable to headline risk ahead, with the Eurogroup/Ecofin meetings taking place over the next two days," BNP Paribas analysts said. In coming days, the euro could take its cues from a series of bond auctions in the region, including an auction later on Tuesday by Italy, which plans to raise up to 8 billion euros in the bond market.
The dollar extended its recent gains versus the yen, hitting a one-month high of 78.29 yen on trading platform EBS at one point. After trimming some gains, the dollar stood at 78.06 yen, up 0.1 percent on the day. Traders cited dollar/yen and cross/yen buying by Japanese banks, as well as yen-selling by hedge funds on Tuesday.
In a sign that market players may be positioning for further gains in the dollar, the mid point for the one-month dollar/yen risk reversal spread stood at 0.35 percent in favour of dollar calls. A reading in favour of dollar/yen calls is a rare occurrence since Japanese exporters have persistent needs to buy dollar puts to hedge against their dollar exposure. The yen fell broadly, with the euro rising 0.5 percent to 104.31 yen and the Australian dollar climbing 0.9 percent to 77.87 yen.