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Oil Falls, Fear Increase over Fiscal Crisis in U.S.

The dollar was down by 0.4% retreating from a high of 7 ½ months last week

November 28, 2012 – On Wednesday, the euro was down versus the dollar and yen, as investors were taking profit from gains made following an agreement reached by policymakers in the euro zone on new funding for Greece.

The yen was also up versus the dollar as investors pared back their expectations of Bank of Japan’s aggressive monetary easing, and concerns over the fiscal cliff continued to rise.

Earlier in the week, lenders agreed on the plan to cut the Greek debt, which allowed the country to avoid default on its obligations and helped push up the euro to a high of one month of $1.301.

Investors became wary however, of the lack of any detail and the increased skepticism of how the Greek parliament would implement the new reforms that are needed to reach new targets.

Now, with the Greek deal behind them, analysts have said that investors were beginning to focus on the fiscal cliff in the U.S., which is a combination of spending cuts and tax hikes that take effect automatically in January and could help tip the U.S. economy towards a recession.

Congress in the U.S. pushed towards a compromise Tuesday regarding the fiscal cliff, but it still seems to be difficult to reach an agreement despite increasing pressure from business interests in the U.S. for Congress to take action.

Concerns were fanned by comments from Harry Reid the Senate Majority Leader over the little progress that Republican and Democratic lawmakers have made. That added to the demand for the yen and dollar against what are perceived as riskier currencies.

The dollar was down by 0.4% retreating from a high of 7 ½ months last week. The euro was also down against the yen to 105.65, which moved off 107.135 a seven month high that was set this past Monday.

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