FOREX-Yen sticks close to 4-year low vs dollar, Aussie up on Chinese import surge

Tue Apr 9, 2013 11:15pm EDT

Related Topics

* Dollar could break 100-yen level this week -strategist

* Aussie boosted by Chinese imports surge

* European bond yields hit lows, talk of yield-hungry Japanese investors

By Sophie Knight and Lisa Twaronite

TOKYO, April 10 (Reuters) - The yen bobbed around a nearly four-year low against the dollar on Wednesday, with strategists expecting the Japanese currency to break below the 100-yen level on the burst of momentum created by the Bank of Japan's most ambitious monetary expansion campaign announced last week.

The Australian dollar rose 0.3 percent to a 2-1/2 month high of $1.0518 after Chinese imports surged 14.1 percent on the year, well beyond market expectations, overtaking exports to create a mild trade deficit.

The dollar was steady against the yen at 99.00 on trading platform EBS, after rising as high as 99.67 yen on Tuesday, its strongest level since May 2009.

Technical resistance lies at 99.73 yen, which is the 50 percent retracement of the dollar's drop from its June 2007 high of 124.14 yen to its record low of 75.311 yen set in October 2011. Options barriers also lie around the 100-yen level, traders have said.

"Dollar/yen failed to make a run for 100 over the past 24 hours but this does not mean the currency pair will not try again before the end of the week," said Kathy Lien, director at BK Asset Management in New York.

"We believe that it will only be a matter of time before this level is taken out," she said in a note to clients.

The dollar has jumped around 7 percent against the yen since the BOJ said last Thursday that it will pump about $1.4 trillion yen into the economy and double Japan's monetary base in two years to defeat deflation.

The move was even bigger than yen bears had hoped for, and prompted many strategists to rejig their forecasts in favour of the greenback.

"The BOJ has shown a strong commitment, which lit a fire under the dollar-yen's feet," said Kyosuke Suzuki, director of forex at Societe Generale.

The euro was relatively steady against the yen, inching down 0.1 percent to 129.53 after rallying around 4 percent since the BOJ announcement to 130.09 yen on EBS on Tuesday, its loftiest level since January 2010.

The common currency was also steady at $1.3087 after hitting $1.3100 on Tuesday, its highest since March 15.

There have been murmurs that plummeting Japanese bond yields have already sent domestic investors in search of higher yields overseas, helping push French, Dutch, Austrian and Belgian bond yields to record lows.

However, it is still unclear whether such flows are driven by Japanese investors or speculators buying in anticipation of their arrival.

"There is a lot of talk about Japanese investors moving abroad, but it's hard to see them heading for junk bonds from the likes of Spain or Portugal. They're unlikely to buy Bunds either as they don't offer any yield," said Suzuki of Societe Generale.

RBA OFFICIAL SAYS DOOR OPEN FOR FURTHER RATE CUTS

The Aussie gave back some of its recent sharp gains against the yen, buying 104.03 yen after rising as high as 104.35 yen on Tuesday, its highest since mid-2008.

A top official at Australian's central bank said on Wednesday that industry was responding well to pressure from the currency's recent strength, and that the bank was a long way from intervening to weaken the Aussie.

However, Reserve Bank of Australia Assistant Governor Christopher Kent said the central bank still has room to cut interest rates if necessary.

Later on Wednesday, investors will be watching the release of the minutes of the U.S. Federal Reserve's last monetary policy meeting, for any signal on whether the central bank could slow or halt its asset buying stimulus, which is seen as negative for the dollar as it is tantamount to printing money.

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