FOREX-Yen falls against euro, dollar on stimulus expectations
* Yen weakest major currency this year
* Euro helped by banks repatriating funds, Draghi comments
* Yen hits 5-year low versus dollar
LONDON, Dec 30 (Reuters) - The yen fell against a stronger euro and hit a five-year low against the dollar on Monday, driven by expectations the Bank of Japan will announce more money-printing and euro zone banks draw back foreign-held assets before the end of the year.
The euro was 0.2 percent up against the yen at 144.74 yen, having hit a five-year high of 145.675 yen on Friday.
The single currency has been boosted by euro zone lenders repatriating funds ahead of the year-end to shore up their capital bases before an ECB Asset Quality Review. It was also supported by comments from the European Central Bank chief over the weekend that there is no urgent need to cut interest rates.
The dollar rose to 105.415 yen, its highest level since October 2008, in Asian trading and last stood at 105.34 yen, up 0.2 percent.
The yen has been the weakest major currency this year, weighed down by the BOJ's pledge to keep interest rates low.
This encourages carry trades, in which investors borrow the yen and buy higher-yielding assets, while many commentators believe Japan's central bank will increase it stimulus programme in 2014.
The dollar has gained 21 percent against the Japanese currency while the euro, the strongest major currency in 2013, has risen 26 percent.
"The (Japanese) central bank is still intending to increase its balance sheet at a pace that's not going to be reduced as in the UK or the U.S." said Hans Redeker, head of global currency strategy at Morgan Stanley.
He also cited Japanese investors buying euro zone government bonds as weighing on the yen and helping the euro.
The euro was up marginally against the dollar at $1.3742, having shot up as high as $1.3894 in thin year-end trade on Friday, its highest since October 2011. It has risen more than 4 percent against the dollar in 2013 and is set for a second straight year of gains.
ECB President Mario Draghi's said in an interview with German news magazine Spiegel published on Saturday that he sees no urgent need to cut the euro zone's main interest rate further and no signs of deflation.
"The market is still keen to believe those type of words," said Morgan Stanley's Redeker.
"It's a very thin marketplace, so it only needs a bit of liquidity to take the market into some type of significant price action."
Rises in U.S. bond yields since the Federal Reserve's decision earlier in December to begin to trim purchases, have also underpinned the dollar against the lower-yielding yen. The 10-year U.S. notes yield hit a two-year high above 3.0 percent.
"For the moment, the market wants to carry on the latest trend as far as it can," said Masafumi Yamamoto, chief strategist at Praevidentia Strategy in Tokyo.
The Australian dollar was 0.2 percent down against the U.S. dollar at $0.8851, near three-year lows. It has shed almost 15 percent this year.