* Yen comes under renewed pressure vs dollar and euro
* Expectations of BOJ easing likely to weigh on yen
* Euro steady ahead of Thursday’s ECB meeting
By Nia Williams
LONDON, Jan 9 (Reuters) – The dollar climbed against the yen
on Wednesday, moving back towards a 2-1/2 year high hit last
week, as renewed expectations of easier Bank of Japan monetary
policy led some investors to sell the Japanese currency.
The dollar rose 0.7 percent on the day to 87.61 yen,
lifting off a near one-week low of 86.82 hit earlier in the
session. That low marked a loss of about 1.9 percent from last
Friday’s peak of 88.48 yen, its highest since July 2010.
Strategists said the dollar’s pullback from the 2-1/2 year
high had lured in investors waiting for a chance to buy on dips,
and speculation the BOJ could ease further at their Jan. 21-22
policy meeting could keep the yen under pressure.
“Flows overnight suggested there was some appetite to pick
up the dollar and that encouraged people back into the trade. No
one is going to want to be short yen going into the BOJ
meeting,” said Derek Halpenny, European head of FX research at
Bank of Tokyo-Mitsubishi.
Sources familiar with the BOJ’s thinking told Reuters the
central bank was likely to adopt a 2 percent inflation target at
the meeting, double its current goal, and issue a statement with
the government pledging to pursue bold monetary easing
steps.
The BOJ will also consider easing monetary policy again this
month, probably through a further increase in its 101 trillion
yen ($1.2 trillion) asset buying and lending programme, the
sources said.
Expectations that Japan’s newly elected government would
push the BOJ to adopt more forceful monetary stimulus measures
have pushed yen sharply lower in recent months. But the dollar
and the euro retreated against the yen this week as investors
locked in profits on those currencies’ steep gains.
At its peak against the yen on Friday, the dollar had gained
nearly 12 percent since early November, and traders said the
rally had been ready for a pause.
“There do seem to be some dollar buyers out there who were
looking for the dip in dollar/yen to pick it up,” said Mitul
Kotecha, head of global FX strategy at Credit Agricole in Hong
Kong, although he added a further near-term pullback in the
dollar could not be ruled out.
Possible support for the dollar lies at 86.54 yen, its low
on Jan. 2, and a breach of that level could open the way for a
drop to around 85.90 yen, he said.
A trader for a Japanese bank in Bangkok said some short-term
traders seemed to be expecting the dollar to retreat further
versus the yen, while longer-term traders appeared content to
buy the U.S. currency on dips.
The euro rose about 0.8 percent to 114.68 yen,
but was still some distance from an 18-month high of 115.995 yen
set on trading platform EBS on Jan. 2.
ECB IN FOCUS
The single currency held steady at $1.3080. Technical
support was expected near the Jan. 4 low of $1.2998 and from the
55- and 50-day moving averages, also around that level.
Some strategists said expectations the European Central Bank
will keep its interest rates on hold on Thursday were also
likely to support the euro, although some investors and
economists believe rates will be cut later this year.
Investors were also looking ahead to Spanish and Italian
bond auctions on Thursday that will test market appetite for
peripheral euro zone debt and could help gauge the likelihood of
Madrid needing financial aid later in the year.
The dollar index was close to flat at 80.351 while
commodity currencies inched higher. The Australian dollar
rose 0.1 percent to US$1.0514 while the New Zealand
dollar climbed 0.3 percent to US$0.8386.
