* Net short positions in yen still large
* Such market positioning may support yen - analyst
* Euro remains under pressure as Spain worries persist
* Options reflect abating unease about euro prospects
By Julie Haviv
NEW YORK, April 9 The dollar fell to a one-month
low against the yen on Monday as last week's disappointing U.S.
employment data bolstered views the Federal Reserve could ease
monetary policy further to boost the economy.
The safe-haven but low-yielding yen attracted investors
after the U.S. Labor Department's report on Friday showed that
U.S. employers created far fewer jobs in March than financial
markets had expected. The report raised doubts over the ability
of the United States to help boost the global economy as the
euro zone debt crisis continues and as fears persist about
China's ability to avoid a hard economic landing.
The data suggested the Federal Reserve's policy-setting
Federal Open Market Committee will keep interest rates low until
at least 2014; low rates have been a key source of weakness in
"The dollar debate is where the center of FOMC gravity now
is with respect to further stimulus and what degree of economic
weakness it would take to get stimulus back on the agenda," said
Steven Englander, head of G10 strategy at CitiFX, a division of
Citigroup in New York.
If the Fed opts to embark on a third asset purchase program,
known as quantitative easing, that would be negative for the
dollar because it is tantamount to printing money.
Barclays said it does not believe the weak employment report
will be enough to push the Fed into action at its next policy
meeting on April 24-25, but the situation remains fluid.
"That said, the door for further accommodation remains open,
and the decision point may shift to June as the FOMC continues
to monitor incoming data," the bank said.
The dollar fell as low as 81.18 yen, according to Reuters
data, its lowest level since March 8, before paring losses to
trade at 81.38 yen, down 0.3 percent. Trade, however, was
light, with many European markets closed for public holidays.
One possible support for the dollar lies at 81.07 yen, a
trader said, which is the 38.2 percent retracement of its rally
The greenback could drop to around 80.00 yen in the next
week or two, especially when taking into account current market
positioning, said Daisuke Karakama, a market economist for
Mizuho Corporate Bank in Tokyo.
"When you look at short positions in the yen, they haven't
really decreased, and their size is still comparable to levels
seen back in the summer of 2007," Karakama said, adding, "You
have to think about whether that is sustainable or not."
One risk for the yen this week is the Bank of Japan's
two-day policy meeting that ends on Tuesday. The central bank's
policy has been under the spotlight since its surprise monetary
easing in February triggered a broad fall in the yen.
The BOJ is seen refraining from easing monetary policy and
holding fire, however, until it unveils its long-term economic
and price forecasts on April 27.
The latest data from the U.S. Commodity Futures Trading
Commission shows currency speculators slightly trimmed their net
short positions in the yen in the week ended April 3 to 65,108
That was still close to the previous week's 67,622
contracts, which was the biggest net short position in the yen
since July 2007.
EURO BOUNCES FROM LOWS
Against the dollar, the euro bounced from a three-week low
of $1.3031 and last traded at $1.3118, up 0.2 percent on the
The euro also slid against the yen, hitting a one-month low
near 106.08 yen and last traded at 106.78, roughly
flat on the day.
But recent dismal data from the euro zone, fears about
Spain's high debt levels, and expectations that European
monetary policy should keep euro gains contained.
Unease about the prospects for the euro, however, has abated
somewhat as reflected in the options market, with three-month
risk reversals in the euro/dollar still biased for euro puts,
trading at -2.0 vols on Monday, but improving from
-3.5 vols in mid-February.
Euro/yen three-month risk reversals remained biased for euro
puts, trading at -3.45 vols, but that is down
from -3.68 vols in early March.
The Australian dollar traded 0.1 percent higher against the
U.S. dollar at 1.0316 after dropping as low as 1.0253 on
news that China's annual inflation rate jumped more than
expected in March.
"The main weight on the Australian dollar presently appears
to be coming from increasing expectations of a rate cut next
month by the RBA (Reserve Bank of Australia), but China's news
is unlikely to be helpful," Brown Brothers Harriman wrote in a