Daily Morning Report 21/11/2012 | Forex Trading Analysis

The dollar strengthened against the world's major global currencies on Wednesday as investors remained camped out in the safe-haven currency awaiting word of progress over the U.S. fiscal cliff.

Investors were on edge due to uncertainty over the U.S. fiscal cliff, a combination of expiring tax breaks and inbound spending cuts converging at the same time after the end of this year. Earlier, Federal Reserve Chairman Ben Bernanke urged the White House and Congress to find a way to steer the U.S. economy away from the cliff, which fueled demand for the dollar.

The euro continued to weaken on reaction to a Moody's decision to downgrade France's sovereign ratings to Aa1 from Aaa. Meanwhile, in Europe, eurozone policymakers opened a meeting to discuss Greece's finances, with a EUR31.5 billion tranche of aid pending approval.

Eurozone finance ministers and senior International Monetary Fund officials ended a nearly 12-hour meeting with no agreement on how to bring Greece’s debt down to a sustainable level, and they failed to approve an overdue tranche of bailout loan money for the country despite a looming threat of bankruptcy.  The failure to approve immediate payment of a long-overdue E31.5 billion loan tranche to Greece came despite official acknowledgement from Jean-Claude Juncker, who chairs the Eurozone finance ministers’ group, that Greece had met all the conditions demanded of it. The 17 Eurozone finance ministers, together with the heads of the European Central Bank, International Monetary Fund and the EU’s Economic and Monetary Affairs Commissioner, Olli Rehn, discussed a package of options to reduce Greece’s national debt to 120% of GDP by 2020 – the benchmark for sustainability upheld by the IMF.

Elsewhere in the U.S., housing starts rose 3.6% in October to a seasonally adjusted annual rate of 894,000, the biggest gain in four years. The number of building permits issued in October fell 2.7% to a seasonally adjusted 866,000. Both figures beat expectations.

In other news, the Bank of Japan met earlier and left benchmark interest rates unchanged at 0.10%. The monetary authority also made no changes to the country's JPY91 trillion asset purchasing plan, though the yen weakened to a 7-month low against the greenback on Wednesday amid building market sentiment that looser policies are on the way after December's elections.

Japanese opposition leader Shinzo Abe may become the country's next prime minister during Dec. 16 elections. Abe has said he favors more aggressive monetary stimulus measures to jolt the Japanese economy.

Later Wednesday, the U.S. will release weekly government reports on initial jobless claims and crude oil inventories.  In addition, the University of Michigan is to release revised data on consumer sentiment and inflation expectations.