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Euro Advances On Fed Stimulus Hopes

The euro climbed against most major opponents on Wednesday as traders await the outcome of Federal Reserve's 2-day monetary policy meeting which ends today.

With Operation Twist set to expire after 2012, investors bet that the U.S. Federal Reserve will unveil further measures to buy more Treasury bonds in an attempt to push down long-term interest rates and stimulate the world's largest economy.

Sentiment lifted up after Greek government completed buy back of bonds, which is crucial to get next tranche of bailout money. The government received offers of 31.9 billion euros of bonds at 33.8% of their face value. In exchange, the investors will be given six-month bonds from the Eurozone's EFSF fund.

Leaders of the European Union Member-States are set to gather once again in Brussels within a month to discuss a "specific and time-bound road map" for the completion of the Economic and Monetary Union (EMU).

In a letter inviting the 27 national leaders to the two-day European Council summit beginning on Thursday, President Herman Van Rompuy said: "It is indeed crucial that, in order to boost confidence in the long term viability of the EMU, we set out the milestones that will ensure we close the gaps in the EMU architecture which were revealed by the crisis."

Meanwhile, industrial production in Eurozone declined for a second consecutive month in October, but at a slower pace compared to the previous month, data released by Eurostat showed.

Production dropped 1.4 percent month-on-month in October after a 2.3 percent fall in September. Economists expected no change in production volume

The euro added 0.2 percent against the greenback to hit a 6-day high of 1.3032. The next upside target level for the euro-greenback is seen at 1.31. The pair ended Tuesday's deals at 1.3006.

Against the yen, the euro climbed to near an 8-month high of 108.00 with 108.5 seen as the next resistance level. On Tuesday, the pair closed deals at 107.33.

Core machine orders in Japan climbed a seasonally adjusted 2.6 percent on month in October to 704.4 billion yen, the Cabinet Office said - rising for the first time in three months.

The headline figure was shy of forecasts for an increase of 3.0 percent following the 4.3 percent contraction in September and the 3.3 percent decline in August.

The European currency advanced to a 5-day high of 0.8081 against the pound before paring gains thereafter. The pair ended Tuesday's trading at 0.8073.

U.K.'s claimant count dropped by 3,000 month-on-month to 1.58 million in November, the Office for National Statistics said today. Economists had forecast it to rise by 7,000.

At the same time, the claimant count rate held steady at 4.8 percent as widely expected for November.

The euro recovered from a 2-day low of 1.2336 against the Australian dollar and the pair is trading near yesterday's close of 1.2358.

The euro firmed against the Canadian dollar also, hitting a 5-day high of 1.2849. The next resistance level for the euro-loonie pair is seen at 1.29.

The U.S. import price index for November is the lone data to watch ahead of the much awaited FOMC decision in the New York session.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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