* Dollar/yen advances towards 100 mark
* G20 does not criticise Japan's radical easing policy
* Euro eases towards bottom of recent range vs dollar
By Toni Vorobyova and Luciana Lopez
LONDON/NEW YORK, April 22 The yen hovered near
the key level of 100 to the dollar on Monday after major
industrialized nations gave their stamp of approval to a massive
Japanese easing program that has weakened the currency.
Japanese officials said that the Group of 20 nations
accepted that the country's $1.4 trillion stimulus program is
aimed at conquering 15 years of deflation rather than at
weakening the yen.
In response, the dollar climbed as high as 99.90 yen, within
striking distance of a four-year high of 99.95 set on April 11
and the 100 level, where option barriers are said to be lined
up. At 1338 GMT, it was at 99.49 yen, nearly flat from the
"The lack of pushback by the G20 effectively gives the BOJ
room to ease further if needed and should keep the yen biased
broadly lower," said Omer Esiner, chief market analyst with
Commonwealth Foreign Exchange, Inc, in Washington, DC.
A break of 100 could trigger stop-loss buying, which could
take the pair up to 101.45 yen, an April 2009 high which could
act as near-term resistance. Reported large option expiries at
100 will keep the currency pinned to that level.
"The rally in dollar/yen has, as far as we can see, been
driven by layer upon layer of leveraged short yen positions
being built up," said Adam Cole, global head of FX strategy at
RBC Capital Markets, who sees the yen staying at around the 100
mark a month from now.
"To make it (a break of 100) sustainable, you need to see
strong evidence that Japanese investors are buying rather than
selling overseas assets, or you need to see a shift in hedging
behavior ... But at the moment we don't see that from capital
One-month implied volatility on dollar/yen jumped as high as
14.415, a level not seen in two years, underscoring
increased demand for options to protect against yen weakness.
Data on Friday showed currency speculators raised their bets
against the yen in the week ended April 16, while lifting
positions in favor of the U.S. dollar.
The yen has weakened 23 percent against the dollar since
mid-November, when Shinzo Abe, who became Prime Minister in
December, promised bold monetary and fiscal expansionary
policies during his election campaign.
The BOJ's sweeping monetary expansion unveiled earlier this
month, which aims to inject $1.4 trillion into the economy in
less than two years, has given fresh momentum to the currency
move. Many market players expect the BOJ's massive bond buying
to force real-money Japanese investors such as life insurers to
shift more funds to higher-yielding foreign bonds.
"Japanese real money investors are expected to announce
further details of their investment intention for the new fiscal
year over the coming days; hence, with the G20 support for BoJ
policy, we expect the JPY-weakening trend to remain intact,"
analysts at Morgan Stanley said in a note, although they
recommended staying cautious ahead of the BOJ meeting.
The euro also remained vulnerable against the dollar on
central bank expectations. On Monday, the single currency
fell 0.23 percent to $1.3021.
Technical analysts at SEB said that a break below $1.3026
would likely "trigger a new round of selling" in the euro, with
the next support then seen at $1.3001.
From a fundamental point of view, the euro has been
hamstrung by persistent talk of an interest rate cut by the
European Central Bank.
The euro "is moving towards 1.30 this morning because more
European Central Bank officials sound like they support the idea
of a rate cut or some form of additional easing from the central
bank," said Kathy Lien, managing director at BK Asset
Management in New York.
That makes this week's euro zone PMI and German IFO reports
key, Lien added.