Euro up against dollar as US backs fiscal cliff deal

January 02, 2013 | 14:44

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The euro surged against the dollar on Wednesday as traders flocked to the riskier single currency after the US Congress endorsed a deal to avert the "fiscal cliff" budget crisis.

The euro strengthened to $1.3258 in afternoon Asian trade from $1.3192 on Monday. The euro was at 115.51 yen from 114.45 yen. The dollar rose to 87.12 yen from 86.69 yen.

Congress's success in passing the deal earlier Wednesday spurred traders to shift their investments from the safe-haven greenback to riskier currencies, said Jason Hughes, head of premium client management for IG Markets Singapore.

"The greenback has continued to lose ground in Asian trade, as the bill to avert the immediate fiscal cliff danger was passed through various votes in Congress," he told AFP.

"The general theme has been for a risk-on play as the US lawmakers have ratified this latest deal."

After a bitterly contested session on New Year's Day, the House voted 257 votes to 167 to pass the bill with minority Democrats joining a smaller number of majority Republicans to pass the legislation.

Had the deal splintered, all Americans would have been hit by tax increases and spending cuts would have kicked in across the government, in a combined $500 billion shock that could have rocked the fragile recovery.

The dollar weakened against most Asia-Pacific currencies, retreating to 1,064.24 South Korean won from 1,065.92 won on Monday, to 30.55 Thai baht from 30.59 baht and to Sg$1.2207 from Sg$1.2226.

It was at 54.49 Indian rupees from 54.78 rupees, 40.90 Philippine pesos from 41.04 pesos and at Tw$29.01 from Tw$29.07. The greenback was unchanged against the Indonesian rupiah at 9,630.

The Australian dollar bought $1.0464 from $1.0385 while China's yuan was at 13.98 yen from 13.81 yen.

AFP

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