* Dollar comes off four-year peak vs yen just below 100
* Euro rises as Italy 3-year debt costs fall at auction
* Yen slides against higher-yielding Australian, NZ dollars
By Julie Haviv
NEW YORK, April 11 The dollar hovered close to a
four-year high against the yen on Thursday, with a climb above
the key 100 yen level highly expected given the massive amount
of bonds the Bank of Japan plans to buy to buoy its economy.
The dollar has gained a whopping 7 percent since the BoJ
pledged last week to inject about $1.4 trillion into the
Japanese economy to end decades-long deflation and achieve its 2
percent inflation target.
While the pace of the rally has slowed due to option
barriers at 100 yen, a psychologically-significant level for the
market, most analysts believe it is only a matter of time until
that mark is reached.
The dollar has not risen above 100 yen since April 2009.
"I think there's trepidation going above 100 because we've
gone so quickly ... in the wake of the BoJ decision," said
Michael Woolfolk, senior currency strategist at BNY Mellon in
BoJ Governor Haruhiko Kuroda's comments on Wednesday that
there would be no additional stimulus in coming months and that
policymakers are closely monitoring financial markets also
limited near-term losses in the yen, some analysts said.
While the Japanese central bank's action will lead to a
weaker currency, Woolfolk said a rapid fall in the yen could
hurt the credibility of the BoJ in the medium term.
"The attempt here is not to prompt speculators to debase the
currency. That's not the purpose. The purpose is to end
deflation and to provide a springboard for renewed growth and
employment in Japan," he said.
The dollar was last trading flat at 99.82 yen, not
far from the session high of 99.85. It reached 99.87 yen on
Wednesday, its highest level since April 2009.
Traders cited hefty offers to sell dollars at 100 yen from
Japanese exporters. They added, however, that most investors
were looking to use dips to add to long-dollar positions.
A rise above 100 yen would open the door for a test of the
April 2009 peak of 101.45 yen, analysts said.
The euro rose to its highest against the yen in
more than three years, hitting 131.00 yen on Reuters data, and
was last trading up 0.4 percent on the day at 130.92.
Ulrich Leuchtmann, head of currency research at Commerzbank
in London, said it was possible that the dollar could rise to
115 yen or higher by year-end, but added it was difficult to
predict the extent of the move.
"The 100 yen level is a psychological level that might take
a bit of time to break, but this is still a very significant
qualitative change by the Bank of Japan that is not fully priced
in yet," said Leuchtmann.
Japan's aggressive monetary easing contrasts with
expectations the Federal Reserve may slow its bond buying later
this year. These expectations were given a boost as minutes from
a recent Fed meeting released on Wednesday showed a few U.S.
policymakers looking to taper asset purchases by mid-year.
Against the dollar, the euro rose 0.4 percent to
$1.3118, after a session peak of $1.3138, the highest since the
end of February as Italian three-year debt costs eased to their
lowest since January at an auction.
Speculation was growing that the BoJ's ultra-loose policy
would drive Japanese investors to riskier and higher-yielding
foreign assets, with the euro one of the beneficiaries.
So far, however, there was little evidence of that
happening. Data from Japan's Ministry of Finance showed Japanese
investors sold a net 1.145 trillion yen ($11.5 billion) worth of
foreign bonds last week, the highest sales in a year.
The yen was particularly softer against higher-yielding
currencies, such as Australian and New Zealand dollars, as
investors borrow in yen cheaply and use the proceeds to invest
in such higher-yielding currencies in what are known as carry
The Australian dollar rose to a five-and-a-half year high
against the yen while the New Zealand dollar hit
its strongest since early 2008.