FOREX-Yen wallows near 6-mth low vs dollar on loose BOJ stance

Mon Dec 2, 2013 10:48pm EST

Related Topics

* Yen seen as best funding currency given BOJ's dovish stance

* Speculators' yen short positions already at 6-year high

* Positive global manufacturing data supports carry-trade bets

* Sterling near 2-year high vs USD, Canadian dollar near 2-year low

* Aussie falls after central bank repeats verbal intervention

By Hideyuki Sano and Ian Chua

TOKYO/SYDNEY, Dec 3 (Reuters) - The yen wallowed near six-month lows against the dollar on Tuesday, and five-year lows against the euro and sterling due to prospects of the Bank of Japan taking more stimulus steps.

The dollar hit 103.165 yen, inching closer to its May 22 peak of 103.74 yen and last stood at 103.10 yen, up 0.2 percent from late U.S. levels.

The euro fetched 139.50 yen, up also about 0.2 percent on the day, after having scaled a five-year high of 139.70 on Monday. Sterling also hit a five-year high of 168.79 yen, and last stood at 168.36 yen.

The yen has been under pressure for weeks on the view that the BOJ's commitment to easy policy makes it the best funding currency for investments in higher-yielding assets -- so called yen-carry trades.

Many analysts took comments by BOJ Governor Haruhiko Kuroda on Monday as signalling his readiness to expand the easy monetary policy when he said the bank's two-year asset purchase scheme does not constitute a timeframe for ending the ultra-easy policy.

"The only thing that concerns me is unbalanced positioning in the market. But otherwise it looks reasonable to assume that the yen's weakening will continue," said a trader at a European bank in Tokyo.

Indeed, data from U.S. financial watchdog published on Monday showed speculators have already piled up a substantial amount of selling in the yen.

Their net yen short positions stood at 123,202 contracts last week, the highest level since July 2007, while their positions on other major currencies were more balanced.

Given the already huge short positions, some analysts suspect more evidence that the global economy is heading for a solid recovery may be needed to entice more yen-carry trades and weaken the yen.

Data published on Monday was generally conducive to optimism, with a gauge of U.S. factory activity hitting a 2-1/2 year high in November. 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, though Friday's U.S. payroll numbers are seen as the most important given the Fed's current focus on employment.

If the job report confirms a moderate job recovery, investors will expect the Fed to scale back its stimulus early next year, underpinning the dollar against the yen and the euro, said Shin Kadota, chief FX strategist at Barclays in Tokyo.

In the euro zone, a survey showed factory activity accelerated at its fastest pace in over two years last month, though the overall strength was undercut by a downturn in Spain and France.

That mix of data saw the euro fall to a one-week low of $1.35245. Against sterling, the common currency also hit an 11-month low of 82.53 pence on Monday and last stood at 82.76.

The buoyant pound hit a two-year high on the dollar at $1.6443 on Monday before pulling back to $1.6363, supported by speculation that the Bank of England could raise rates sometime in 2015, possibly before the U.S. Federal Reserve.

In contrast, the Canadian dollar fell to a two-year low at C$1.0655 per U.S. dollar on a less hawkish Bank of Canada and weaker oil prices.

Another commodity currency, the Australian dollar, fell after the Australian central bank reiterated that the currency is uncomfortably high after its policy meeting, where it held rates steady as widely expected.

The Aussie fell 0.3 percent to $0.9077, barely above three-month low of $0.9055 hit on Friday.

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