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Dollar slips as fiscal cliff hopes buoy euro, yen weakness persists

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Shutterstock photo - The U.S. dollar remained close to 20-month highs against the broadly weaker yen on Tuesday, but was trading near five-month lows against the euro as hopes for an agreement on the U.S. fiscal cliff supported market sentiment.

During European morning trade, the greenback was trading close to its lowest level since early May against the euro, with EUR/USD easing up 0.15% to 1.3183.

Negotiations aimed at avoiding the automatic tax hikes and spending cuts, which investors fear could derail the U.S. recovery, have intensified in recent days, raising hopes that lawmakers will reach an agreement ahead of the January 1 deadline.

The dollar was little changed near a 20-month peak against the yen, with USD/JPY dipping 0.05% to 83.84.

The yen remained under broad selling pressure after an election victory for Japan's Liberal Democratic Party over the weekend fuelled expectations for more aggressive monetary easing steps by the Bank of Japan, ahead of an upcoming policy setting meeting on Thursday.

The greenback was near two-and-a-half month lows against the pound, with GBP/USD edging up 0.06% to 1.6212.

Earlier Tuesday, the Office for National Statistics said that the annual rate of consumer price inflation in the U.K. held steady at 2.7% in November after an unexpected increase in October, compared to expectations for a dip to 2.6%.

The greenback was hovering just above a seven-month low against the Swiss franc, with USD/CHF slipping 0.15% to 0.9160.

The greenback pushed higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD up 0.11% to 0.9844, AUD/USD easing down 0.10% to 1.0530 and NZD/USD losing 0.31% to trade at 0.8424.

The Australian dollar found support after the minutes of the Reserve Bank of Australia's December meeting indicated that the interest rate cut decision was a close call, raising the view that the bank may delay further easing measures in 2013.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.14% to 79.52.

The U.S. was to produce government data on the current account later in the trading day. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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