FOREX-Yen pummeled by BOJ speculation, upbeat US data

Mon Dec 2, 2013 6:12pm EST

Related Topics

* Yen plumbs six-month low vs USD, five-year low on sterling

* Talk of more contingency stimulus from BOJ keeps yen bears going

* Upbeat U.S. ISM data helps USD, Aussie awaits RBA rate decision

By Ian Chua

SYDNEY, Dec 3 (Reuters) - The yen remained on the backfoot early in Asia on Tuesday, having succumbed to further selling pressure on prospects of more stimulus from the Bank of Japan.

The dollar hit a six-month high of 103.13 yen, while sterling scaled a five-year peak of 168.79 yen after sources at the Bank of Japan said the bank was looking at plans to expand its already massive stimulus program.

Yet, one of the officials briefed on the central bank plans said no further stimulus was imminent.

Investors have been using the low-yielding yen as a funding currency to buy riskier assets in carry trades made popular by the BOJ's ultra-loose monetary policy.

The dollar last traded at 102.93, with option barriers seen at 103.00/25. A break there should pave the way back to its 2013 peak of 103.74 set in May.

Sterling bought 168.32 yen, while the New Zealand dollar traded at 84.30 yen, near a 6-1/2 month high of 84.41 set overnight.

The yen's decline against the euro was modest as investors also shunned the common currency after disappointing euro zone data.

A survey showed euro zone factory activity accelerated at its fastest pace in over two years last month, but markets were concerned about a downturn in Spain.

"Spain disappointed significantly. Thus the euro is underperforming within the G10 even though the aggregate euro zone release was a tenth above consensus," analysts at JPMorgan wrote in a note to clients.

"The miss from Spain adds some doubt to the GDP message that Spain has exited recession, and stresses the continued divergence between the core and the periphery."

In contrast, a gauge of U.S. factory activity hit a 2-1/2 year high in November, while British manufacturing grew at its strongest pace in almost three years.

The U.S. report lifted U.S. bond yields and could bring the Federal Reserve a step closer to scaling back its bond-buying stimulus program.

That mix of data saw the euro fall to a one-week low of $1.3526 and an 11-month low of 82.48 pence. Against the yen, the common currency made no headway but held near a four-year peak of 139.705 set last week.

Sterling reached a two-year high on the dollar at $1.6443 before pulling back to $1.6354, while the Canadian dollar fell to a two-year low at C$1.0655 per U.S. dollar .

The buoyant U.S. dollar saw the Australian dollar slip back below 91 U.S. cents from Monday's session high of $0.9169, and back near a three-month low of $0.9055 set last week.

Investors were also cautious the Reserve Bank of Australia (RBA) will again try to talk down the currency following its policy meeting on Tuesday. The outcome will be announced at 0330 GMT.

"We may see Governor Glenn Stevens adopt a more dovish tone for monetary policy in order to further assist with the rebalancing of the real economy," said David Song, analyst at DailyFX.

"As a result, the recent rebound in the AUDUSD may be short-lived, and the pair may continue to search for support in the days ahead as the bearish trend remains largely intact."

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