The euro edged lower against the dollar and yen on Friday as investors locked in recent gains, although it could trim losses if progress is made toward a last-minute deal in US budget talks to avert tax hikes and spending cuts next year. The euro was down 0.1 percent on the day at $1.3221, having slipped to a session low of $1.3164 when traders said it broke below stop-loss sell orders around $1.3170.

The euro has made rapid strides since mid-November, gaining around 5 percent in a month to hit an 8-1/2 month high of $1.33085 on December 19 as worries around the euro zone crisis ebbed. The euro's falls helped the dollar rise to a two-week high against a basket of currencies, with its index rising to 79.93. The euro also reversed early gains against the yen to trade down 0.1 percent at 113.84 yen, having earlier hit a 17-month low of 114.675 yen as expectations of more monetary stimulus continued to pressure the Japanese currency. The dollar was steady against the yen at 86.11 yen, edging away from a peak of 86.64 yen, its strongest since August 2010, when it stopped just shy of reported options barriers at 86.75 yen and 87.00 yen.

Copyright Reuters, 2012