* Diverging Fed, BOJ monetary outlook boosts dollar vs yen
* 10-year US notes yield near 3 pct, supporting dollar
* U.S. jobless claims fall to lowest in nearly a month
By Wanfeng Zhou
NEW YORK, Dec 26 The dollar rose to a five-year
high against the yen on Thursday on expectations the U.S.
Federal Reserve will continue to withdraw its stimulus next year
while the Bank of Japan may ease further.
The greenback rose as high as 104.84 yen, according to
Reuters data, surpassing last week's high of 104.63 yen. It last
stood at 104.77 yen, up 0.4 percent on the day.
Option-related offers at 105 yen are seen as a major hurdle
for the dollar to advance further and some traders suspect this
resistance level may not be broken until next month, when more
market participants return from holidays.
Most financial centres in Europe and the Americas were
closed for Christmas on Wednesday, with many shut on Thursday as
Yen-selling could be a favorite trade among investors next
year because they expect the Bank of Japan to maintain, or even
enhance, its ultra-easy policy to conquer deflation. That
contrasts with the Fed's move last week to begin reducing its
stimulus, although it has said it still intends to keep interest
rates low for a long time.
"The diverging policy outlook is what's really driving the
yen lower," said John Doyle, currency strategist at Tempus Inc
in Washington, D.C.
The euro was little changed at $1.3682, some way off
last week's high of $1.3811, though the single currency has been
on solid ground on the whole in the last several weeks.
While the euro zone's recovery is seen as sluggish, the
currency has been underpinned by European banks' repatriation as
well as buying by euro zone exporters as the euro zone's current
account surplus has increased sharply.
The euro also hit a five-year high of 143.52 yen,
and was last up 0.4 percent at 104.78 yen.
The dollar gave back some of the gains following news that
Japanese Prime Minister Shinzo Abe visited the controversial
Yasukuni Shrine for the war dead, a move that could worsen
strained Sino-Japanese relations and hurt investors' risk
The dollar index, which tracks the greenback against a
basket of major rivals, stood at 80.524, up 0.1 percent
on the day and not far from last week's high of 80.827.
Data on Thursday showed the number of Americans filing new
claims for unemployment benefits fell last week to the lowest
level in nearly a month, a hopeful sign for the labor market.
Rising U.S. yields have also supported the dollar because
they are likely to encourage investors to buy more dollar bonds.
The yield on 10-year U.S. notes rose to around 3.0 percent
on Thursday, near the two-year peak of 3.007 percent
hit in September.
Rising U.S. yields are generally positive for the dollar
because they are likely to encourage investors to buy more
Higher U.S. bond yields could also destabilise risk assets,
particularly those in emerging markets. That could prompt
investors to buy "safer" currencies, including the dollar.
"Initially the Fed appears to have succeeded in curtailing
rate hike expectations. But U.S. bond yields have risen since
then, and we need to keep an eye on them for implications on
risk asset prices," said Junya Tanase, chief FX strategist at
JPMorgan Chase in Tokyo.
The Australian dollar slipped 0.4 percent against a broadly
supported U.S. dollar to $0.8879, edging near
three-year low of $0.8860 hit last week.