* Pace of U.S. hiring cools in December, jobless rate steady
* Fed minutes show some policymakers concerned about bond
* Dollar hits highest level since July 2010 vs yen on BOJ
* Dollar/yen weekly gain largest since November 2011
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 4 The dollar climbed to a nearly
2-1/2 year peak against the yen on Friday after Federal Reserve
meeting minutes the previous day showed growing concern about
further stimulus for the economy, with speculation of more
monetary easing in Japan also weighing on the Japanese currency.
Injecting stimulus into the economy involves flooding the
market with dollars, which would tend to lower the currency's
value. Any doubts about that stimulus are viewed as positive for
The U.S. currency, however, erased its gains versus the euro
after a key U.S. jobs report showed U.S. hiring eased slightly
in December, which suggested the Fed may be in no rush to
tighten monetary policy.
U.S. nonfarm payrolls grew by 155,000 last month, in line
with analysts' expectations and falling short of the levels
needed to bring down the country's unemployment rate, which
remained at 7.8 percent.
The data came a day after minutes from the Fed's December
meeting showed some policymakers were contemplating an end to
their bond-buying program, also known as quantitative easing, as
early as this year.
Richmond Fed President Jeffrey Lacker said on Friday that
the U.S. central bank's latest bond-buying plan threatens the
central bank's credibility and raises the risk of future
inflation. Lacker dissented at every Fed policy meeting last
"People have kind of reduced expectations about quantitative
easing and that has supported the dollar, especially against the
yen," said Brian Kim, currency strategist at RBS Securities in
"Investors have also been buying dollar/yen in anticipation
of further easing from the Bank of Japan."
The dollar rose as high as 88.40 yen, according to
Reuters data, the highest since July 2010. It briefly pared
gains after the jobs data before rallying again to last trade at
88.21 yen, up 1.1 percent. Traders cited more option barriers at
88.50 and 89 yen.
The dollar posted gains of 2.7 percent this week, its
largest weekly rise in more than a year.
The yen has struggled in recent weeks on expectations
Japan's new government, led by Prime Minister Shinzo Abe, will
push to weaken Japan's currency and force the Bank of Japan to
implement aggressive monetary stimulus to beat deflation.
Analysts said the dollar's break above the 88-yen level is
significant, with some expecting yen weakness to continue.
"The recent bullish trend (in dollar/yen)...remains intact,
suggesting an intraday pullback later today or early next week
could still present a strong buying opportunity," said Matthew
Weller, currency strategist with GFT in Jersey City.
"The confluence of trend line support and
previous-resistance-turned-support around 87.40 should put a
floor under rates, giving traders an opportunity to join the
established uptrend at value," he added.
The euro was last up 0.2 percent at $1.3073,
rebounding from a three-week low of $1.2997, according to
Against the yen, the euro rallied 1.2 percent to 115.15
The Fed said in December it would keep interest rates near
zero until the unemployment rate falls to 6.5 percent for as
long as estimates of medium-run inflation do not exceed 2.5
"The most important point is that the latest unemployment
rate data has been broadly steady for four months now, so even
with decent employment growth no downward progress has been made
on the unemployment rate," said Alan Ruskin, head of G10 FX
strategy at Deutsche Bank in New York.
The data "will if anything push out the date for an end to
QE, represents solidly risk-positive numbers and will lead to
some minor squeeze on recent U.S. dollar longs."
The dollar typically weakens when investors increase risk
exposure by buying higher-yielding and growth-linked currencies
such as the euro and Australian dollar, and gains when investors
are risk-averse and seeking safe havens.
Some analysts expect the safe-haven dollar will strengthen
in the coming weeks as investors increasingly focus on more
political wrangling in Washington on budget issues, including
further spending cuts and the federal debt ceiling.
But analysts cautioned that the uncertainty on the U.S.
fiscal front will hurt business investment and economic growth.
That means the Fed will have to keep its monetary stimulus for
longer, which will hurt the dollar.
Separate data showed the vast U.S. services sector in
December grew at its fastest clip in 10 months.