Markets are cautious and mostly quiet on the last day of the year. There is alot of uncertainty due to the political deadlock in Washington DC as the fiscal cliff looms.
More than $600 billion of automatic tax increases and spending cuts are scheduled to take effect on January 1st 2013, and risk pushing the US economy back into recession. At the moment there are still significant differences between Democrats and Republicans in the budget talks and there is concern that there will not be an immediate resolution.
The Senate will resume its session today at 11 a.m. Washington time and there may be further announcements then.
If there is no progress in talks, there will probably be a chaotic day on January 2nd when markets open and the risk currencies like euro will be sold off.
Dollar has been firm due to safe haven flows. The dollar advanced 0.2 percent to $1.3185 per euro at 8:26 a.m. London time today after gaining 0.2 percent on Dec. 28. The greenback appreciated 0.1 percent to 86.08 yen.