FOREX-Yen rises as investors take profits on dollar, euro
* Expectations of more BOJ easing to temper yen gains
* Euro supported by view ECB will keep rates unchanged
By Lisa Twaronite
TOKYO, Jan 9 (Reuters) - The yen continued to rise against the dollar and the euro in early Asian trading on Wednesday despite expectations of further easing steps from the Bank of Japan, as investors locked in gains.
The euro dropped to 113.80 yen after falling as far as 113.55 yen, its lowest level since late December. It broke below its 14-day moving average for the first time since Dec. 11 and is moving further away from its 18-month high of 115.995 yen set on the EBS trading platform last week.
The dollar lost around 0.2 percent to 86.96 yen, falling as low as 86.83 yen in early trading. On Friday, the first Japanese trading day of 2013, the greenback hit a 2-1/2 year high of 88.48 yen on EBS, after surging 12.8 percent against the yen in 2012 in its biggest yearly percentage rise since 2005.
"Late last year, the yen sharply weakened in thin conditions. If you had to take a market position, could you see any reason to buy yen? No, so the yen was sold," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
"But markets can't keep moving for weeks on the same factors, even when the overall trend remains the same, so in the short-term, the yen started moving up again."
Japan's new government led by Prime Minister Shinzo Abe is rushing this month to complete a new policy accord with the BOJ and an economic stimulus package that will be the first test of whether he can deliver on his ambitious economic agenda to pull the country out of deflation.
The BOJ's next meeting will be on Jan. 21-22, when policymakers will debate raising its inflation target to 2 percent from the current 1 percent, as Abe has called for.
The euro was nearly flat against the dollar from late U.S. levels, changing hands at $1.3082, with support at $1.30 holding after the European unit fell to a three-week low of $1.2998 on EBS on Friday.
The euro is likely to be supported this week by expectations the European Central Bank will hold off on cutting interest rates at its regular policy meeting on Thursday, though some investors and economists believe cuts will come later this year.