FOREX-Dollar rallies to six-month peak vs yen on BOJ speculation
* Bank of Japan considers options to expand stimulus * Australia, New Zealand dollars rise on China economic data NEW YORK, Dec 2 (Reuters) - The dollar climbed to a more than six-month high against the yen on Monday on speculation the Bank of Japan may expand its already massive economic stimulus. The euro fell against the dollar and hit an 11-month low against the British pound after data showed disappointing manufacturing growth in France and Spain. Japan's central bank is looking to go beyond its $70-billion-a-month bond-buying operation, according to officials briefed on the process. Options include major purchases of stock-market-linked funds or other assets riskier than Japanese government bonds, the insiders said. "If the Bank of Japan feels the need to increase its monetary base, looking to try to offset that sales tax increase in April, then ... the yen can continue to weaken versus the U.S. dollar," said John Doyle, currency strategist at Tempus Inc in Washington, D.C. The dollar rose as high as 103.09 yen, the strongest since May 23, according to Reuters data, and was last up 0.6 percent at 102.98 yen. The yen continued to struggle after falling about 4 percent in November against the dollar and euro. Investors have been selling the low-yielding yen to buy riskier assets in carry trades made attractive by the Bank of Japan's ultra-loose monetary policy. BOJ Governor Haruhiko Kuroda said on Monday that he would not hesitate to adjust policy, fanning speculation the bank could take more easing steps next year. The euro rose 0.4 percent to 139.56 yen. At the session peaks on Friday and Monday, the euro was trading around the highest in five years against the yen. Against the dollar, the euro shed 0.4 percent to $1.3537 , retreating from Friday's one-month high of $1.3621. The euro zone manufacturing PMI rose to 51.6 last month from October's 51.3, compared with an earlier flash reading of 51.5. But France's PMI sank to a five-month low of 48.4 from 49.1, while Spain's manufacturing sector shrank. The euro hit its lowest since early January against sterling at 82.49 pence per euro after UK manufacturing data bolstered expectations of an earlier tightening by the Bank of England. "The data highlights that the euro zone recovery is leveling off," said Alvin Tan, currency strategist at Societe Generale in London. "We would like to sell the euro against the dollar at rallies, but where we expect more action is the euro/sterling cross. We would add short euro positions against the pound." The euro's losses saw the dollar index recover to trade 0.3 percent higher at 80.68. The dollar hit a session peak against the yen and extended gains versus the euro after data showed the U.S. manufacturing sector expanded at its fastest pace in 2-1/2 years last month while construction spending rose in October. The growth-linked Australian and New Zealand dollars rose following positive data from China. A survey on Sunday showed China's factory growth held at an 18-month high in November, slightly ahead of expectations. Both Australia and New Zealand are highly leveraged to China's economic cycle. Sentiment was buoyed further after a similar Chinese private manufacturing survey published on Monday was revised up from a preliminary reading. The Aussie rose to $0.9168 before easing to $0.9103, down 0.1 percent on the day. The kiwi advanced 0.8 percent to $0.8186. "The Aussie has been helped by the Chinese data and we think there is still some scope for it to gain, given that we expect the dollar to stay slightly softer," said Paul Robson, currency strategist at RBS. The Reserve Bank of Australia's rate-setting committee meets on Tuesday and investors will keep an eye on whether the central bank shows its discomfort with the level of the Australian dollar.
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