* Dollar near four-year high vs yen, poised to break 100
* BOJ begins buying longer-dated government bonds
* Euro shrugs off Portugal worry as Spain, Italy yields fall
By Wanfeng Zhou
NEW YORK, April 8 The yen slumped near a
four-year low against the dollar and a three-year trough against
the euro on Monday after the Bank of Japan kicked off its
aggressive monetary easing program in an attempt to beat
The Japanese currency looked poised to extend its weakness,
pushing the dollar above the significant 100 yen level as early
as this week, analysts said. That would mark the weakest since
April 2009 for the yen.
"Barring any sudden spike in risk aversion the pair is
likely to roll through that level as momentum remains relentless
for the time being," said Boris Schlossberg, managing director
of FX Strategy at BK Asset Management in New York.
The BOJ conducted its first bond-buying operations on
Monday, saying it would buy 1 trillion yen of government bonds
with maturities between five and 10 years, and 200 billion yen
of bonds with maturities exceeding 10 years. The BOJ promised
last week to inject about $1.4 trillion into the economy in less
than two years.
The dollar rose as high as 99.04 yen on Reuters data,
the strongest level since May 2009, before pulling back slightly
to trade at 98.96 yen, up 1.5 percent on the day.
Traders noted stops and option barriers at the
psychologically important 100 level, and a break above could
trigger further selling in the yen.
The dollar briefly fell against the yen on Friday after data
showed weaker-than-expected growth in the U.S. labor market.
"The fleeting impact of the weak U.S. payrolls data shows a
strong appetite to sell the yen and buy dollars. It has
reinforced confidence that the yen weakening trend is intact,"
said Lee Hardman, currency economist at BTMU.
The euro climbed 1.5 percent to 128.63 yen, having
risen as high as 128.83 yen, its highest since January 2010.
Analysts expect the flood of new money from the BOJ will be
partly used by Japanese investors to buy higher-yielding assets
abroad, putting further downward pressure on the yen.
JPMorgan analysts wrote in a client report that they had
re-initiated a basket of yen shorts and were recommending the
Australian dollar and Brazilian real as carry trades against the
yen after the BOJ announced its stimulus plan.
The higher-yielding Australian dollar hit 102.88 yen
, its highest since July 2008, before the collapse of
Some traders cautioned it was unclear whether the yen would
maintain this pace of weakening, with the dollar having gained
more than 14 percent already this year, and its decline could be
tempered by further evidence of a slowing U.S. economy.
Escalating tensions surrounding North Korea could hurt
investor appetite for risk and prompt selling of higher-yielding
currencies against the yen, analysts said.
Against the dollar, the euro gained 0.1 percent to
$1.2999, shrugging off concerns about Portugal's ability to keep
its bailout program on track after a constitutional court
rejected some of the government's austerity measures.
It had earlier risen to $1.3037, near a two-week
high of $1.3039 set on Friday.
Worries about Portugal were offset by sharp falls in the
borrowing costs of Spain and Italy due to demand for
higher-yielding euro zone bonds from Asia after the BOJ plan.
Analysts said that although the euro would be overshadowed
for now by moves in the yen, the outlook for the single currency
was clouded by concerns about economic slowdown in the euro zone
and speculation the European Central Bank could ease monetary
"I am bearish on the euro. The economic situation has
deteriorated and the ECB will be under a lot of pressure to
become more adventurous," said Beat Siegenthaler, currency
strategist at UBS, who forecast the euro would edge lower to
$1.28 in three months' time.