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Euro hits highest level against dollar since November

TOKYO, Jan 19, 2011 – The euro hit its highest level against the dollar since November in Asian trade Wednesday amid buying from Asian sovereign wealth funds, dealers said, as the greenback slipped versus other currencies.

The dollar fell broadly after the yuan was set at a record high against the greenback ahead of talks between the US and Chinese presidents expected to touch on US demands that Beijing let its currency rise faster.

The euro rose to $1.3503 in Tokyo afternoon trade, its highest since November 23, before falling back to $1.3484. The common currency traded at $1.3389 in New York late Tuesday.

The euro\’s gains came as stop-loss buying orders were triggered after the currency rose gradually during the trading day, in part on buying by Asian sovereign wealth funds, said a dealer at a European bank.

Smooth euro-member government debt auctions have also bolstered sentiment toward the common currency this week, the dealer told Dow Jones Newswires.

The euro rose to 110.90 yen from 110.53 in New York. The dollar fell to 82.27 yen from 82.55.

European finance ministers met Tuesday for a second day to discuss increasing the 440-billion-euro European Financial Stability Facility, an emergency lending mechanism for troubled eurozone countries.

But some dealers cautioned that despite the more positive tone from the Brussels meeting, there was still no agreement on what precisely should be done and this could pose problems in due course.

The market is now watching whether US officials will comment on what they see as the Chinese yuan\’s undervaluation against the dollar, as President Hu Jintao visits the United States for talks with his counterpart Barack Obama.

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Hu, who is scheduled to meet Obama in Washington on Wednesday, has repeatedly resisted such demands.

But China\’s setting of the yuan\’s central parity rate — the middle of the unit\’s allowed trading band — at a fresh record high Wednesday stirred speculation that Beijing may continue to let the greenback fall gradually against the yuan.

The yuan was set at a record high at 6.5885 to the dollar in the morning session in Asia.

"Chinese President Hu\’s visit to the US coincides with what appears to be a shift in sentiment in the market, with more people now looking for the dollar to continue weakening," said Hideki Amikura, a deputy general manager at Nomura Trust and Banking.

"The visit could amplify the dollar weakness, as investors speculate that the weakening dollar and strengthening yuan may lead a broader market trend toward further falls in the greenback," he said.

Also hurting the dollar were expectations that US housing data this week will likely not be strong enough to prompt the Federal Reserve to consider scaling back its massive government bond buying operations, dealers said.

The greenback fell against regional Asian currencies.

It fell to 1,110.45 Korean won from 1,116.00 on Tuesday, and to 1.2798 Singapore dollars from 1.2869.

The unit sank to 30.42 Thai baht from 30.62, to 44.32 Philippine pesos from 44.61, and to 9,045.00 Indonesian rupiah from 9,072.50. The greenback was flat at Tw$29.01.

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