* BOJ governor reiterates pledge to pursue powerful easing
* Euro steadies after volatile trading overnight
* IMF funding talks at G20 meeting eyed
By Antoni Slodkowski
TOKYO, April 20 The yen hovered close to its
lowest levels in ten days against the dollar on Friday and was
set to stay under pressure on expectations of more easing by the
Bank of Japan next week.
The greenback stood at 81.50 yen, having hit a 1-1/2
week high of 81.74 the day before, bringing its April 10 peak of
81.87 into focus. The euro climbed to 107.13, staging
a strong comeback from Monday's trough of 104.63.
Reinforcing expectations that the central bank could ease
its already super-loose monetary policy, governor Masaaki
Shirakawa said it will continue powerful monetary easing until a
1 percent inflation target is in sight.
Piling more pressure on the bank, a senior International
Monetary Fund official said the BOJ should accommodate more to
support Japan's still-fragile economy as it has room to take
"We expect a rise of at least 5 trillion yen in the BOJ's
asset purchase programme at the 27 April meeting, with a
significant bias toward risk asset purchases," said Naomi Fink,
Japan equity strategist at Jefferies.
The BOJ has so far bought half of what it had promised to
buy through its 30 trillion yen asset purchasing program by the
end of 2012.
But traders said the market has already priced in a policy
loosening and more steps may be needed to have a significant
impact on financial markets.
"In order to propel markets further upward, easing of
greater than 5 trillion yen, particular emphasis on risk assets,
dovish rhetoric indicating further steps to come, or a
combination of some or all of the above is needed," said Fink.
The dollar was also supported on the back of importer buying
with traders citing strong bids below 81.50 yen.
While the BOJ's action in February to increase asset
purchases and set an inflation goal has helped weaken the yen,
traders say it has not been the biggest factor behind its 6
percent fall this year.
The yen has weakened broadly on the pick-up in risk
sentiment earlier in 2012 caused by tentative calm in the euro
zone, they said. Japan's current account surplus also hit a
15-year low in 2011, the country posted a record trade deficit
in January and fossil fuel imports surged after the Fukushima
disaster, all of which conspired to batter the Japanese unit.
With such powerful currents driving the yen, the impact of
the decision will likely be fleeting, traders said.
"Even if the BOJ comes up with something very powerful, my
sense is that players would first rush to take profits on the
dollar and only after that start to think what the bank's move
really means," said a senior spot trader for a major Japan bank.
He said that BOJ's easing was small when compared to action
taken by the European Central Bank and the Federal Reserve, and
noted that recent soft U.S. data has shifted the focus back onto
the Fed's policy.
The number of Americans claiming unemployment benefit for
the first time fell less than expected last week, while factory
activity in the Mid-Atlantic region slowed sharply this month
and U.S. home resales fell again in March.
"That possibility (of Fed easing) still looms somewhere
there and prevents many players from piling more aggressively
into the dollar and selling the yen," he said.
Against the dollar, the euro emerged from a choppy overnight
session none the worse for wear. It hit a high of $1.3166
following a successful Spanish bond sale but then dropped on
rumours, later denied, of a possible French rating downgrade.
In Asia trade, it was barely changed at $1.3141,
within a well-trodden recent range of $1.30-$1.32.
The Australian dollar, though, nursed losses after
disappointing U.S. data and poor earnings sapped risk appetite.
The Aussie retreated to $1.0327, falling for a
second day but within this week's band of $1.0305-1.0418.
"Now, with the G20 convening in Washington, much attention
will be drawn to how and where the International Monetary Fund
draws up additional funding from in order to further beef up
Europe's bailout funds," said Christopher Vecchio, analyst at
The IMF's bid to win a big boost in funding to handle the
euro-zone debt crisis hit a speed bump on Thursday when Brazil
demanded more power at the IMF for emerging economies as a
condition for lending it extra cash.