FOREX-Yen extends slide as BOJ begins new age with a bang

Sun Apr 7, 2013 7:25pm EDT

Related Topics

* Yen dives in early Asia, USD up more than a full yen

* Nikkei reports BOJ to begin buying longer-dated bonds this week

* Further downside for yen expected, other crosses quiet

By Ian Chua and Wayne Cole

SYDNEY, April 8 (Reuters) - The yen hit fresh lows against a host of major currencies early in Asia on Monday, resuming its precipitous slide on reports the Bank of Japan would begin buying longer-dated bonds immediately as it underlined its determination to beat deflation.

The U.S. dollar was at 98.69, having jumped more than a full yen to 98.78, the highest since June 2009. The euro climbed as far as 128.32 yen, its highest since January 2010.

Traders say the move was triggered by a Nikkei report the central bank would this week buy 1.2 trillion yen of government bonds with a maturity of over five years, showing a sense of urgency alien to the BOJ of old.

Stop-loss selling in very thin market conditions further exaggerated the slide in the yen.

"At the moment, it's really a momentum driven move," said Sue Trinh, senior currency strategist at RBC in Hong Kong.

"For now, barriers are seen as a magnet more than anything else. The first logical resistance would be this morning's high on the spike, then the 100 level and the 101.50."

Analysts assume the flood of new money will be partly used by Japanese investors to buy higher yielding assets abroad, so putting downward pressure on the yen.

"We have re-established a broad basket of JPY shorts in light of last week's BOJ aggressive actions," wrote analysts from JPMorgan in a client report.

"Radical monetary measures were needed to re-invigorate the downtrend in the yen, and on this front the BOJ has over delivered."

JPMorgan had re-established long positions in USD/JPY and also favoured the Australian dollar and Brazilian real as carry trades against the yen.

The Aussie dollar soared to 102.32 yen, the highest since July 2008.

Since the BOJ unleashed the world's most intense burst of monetary stimulus last week, the yen has slumped more than 6 percent against both the dollar and euro.

"We expect further weakness ahead, given the bank's clear commitment to achieve its 2 percent (inflation) target," analysts at Barclays Capital said, adding they see the U.S. dollar rising to 103 yen in three months.

With the Japanese currency still firmly in focus, the other major currencies took a backseat.

The euro was flat against the greenback at $1.2995, hovering near a two-week high of $1.3040 set Friday after weaker-than-expected employment growth cast a shadow on the U.S. economic recovery picture.

The Australian dollar was a touch softer at $1.0370 , continuing to consolidate after recent attempts to break above $1.0500 failed.

There is little in the way of market-moving economic data out of Asia on Monday.

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