* Dollar has nearly erased post-BOJ gains against yen
* Dollar index hits four-month low
* Market seen unwinding overextended long USD positions
* Aussie still under pressure after employment report
By Sophie Knight and Ian Chua
TOKYO/SYDNEY, June 13 The dollar fell to its
lowest level against the yen in ten weeks as investors
cautiously pared bullish bets on the greenback amid uncertainty
about whether the Federal Reserve will pare back its stimulus
Tumbling Japanese shares accelerated the dollar fall, as
investors in the Nikkei continued to unwind hedges made earlier
against a weaker yen.
The dollar dropped 1.3 percent to 94.78 yen after
falling as low as 94.30. Both were levels unseen since April 4,
when the Bank of Japan unleashed an audacious easing programme
that accelerated the yen's slide.
The dollar has now lost 8.6 percent since hitting a 4-1/2
year high of 103.74 on May 22.
The dollar-yen also fell below its daily Ichimoku cloud in a
bearish signal. If it closes the session under 95.963, it will
mark the first time it has finished the day below the base of
the cloud since mid-October, when the dollar was around 78 yen.
Japan's Nikkei share index skidded 5.3 percent in the
morning session after falling as much as 6.6 percent. Recent
losses for the Nikkei have sparked dollar selling as foreign
investors unwound hedges they took out to protect themselves
from a weakening yen.
"We've had this pattern of falls in stocks leading to a lower
dollar-yen, and a falling dollar-yen triggering losses for the
Nikkei. It's a negative spiral," said Masashi Murata, senior
currency strategist at Brown Brother Harriman in Tokyo.
Investors snapped up Japanese shares between mid-November
and May as a weakening yen promised to fatten exporters'
overseas revenues. Now a stronger yen threatens to do the
opposite, leading to further sell-offs in the Nikkei.
Adding to the pressure, Japanese investors sold a net 386.9
billion yen ($4.04 billion) in foreign bonds in the week ended
June 8, after selling 1,172.5 billion yen in the previous week,
according to Ministry of Finance data.
The dollar lost 0.3 percent against a basket of currencies
to 80.741, having plumbed a trough of 80.651, a
low unseen since Feb. 20. It has now lost around 4 percent from
a near three-year high of 84.498 set on May 25.
"While the DXY has broken below its 200-day moving average
for the first time since February, we do expect the USD to
eventually find a near-term base against JPY, EUR and GBP,"
analysts at BNP Paribas wrote in a client note.
"In our view, G10 moves have been largely driven by the
adjustment in overextended long USD positions rather than a
changing perception of the U.S. growth or Fed policy outlook."
Despite broad weakness in the U.S. dollar, the commodity
currencies were still in the shade. The Australian dollar
lost 0.3 percent even as data showed that unemployment
fell 0.1 percent to 5.5 percent in May, beating expectations
that it would stay steady.
The Aussie suffered deeper losses against the resurgent
Japanese currency, slipping 0.2 percent to $0.9430
though it stayed clear of a 33-month trough of $0.9325 struck on
Weakness in the dollar saw the euro climb to a near
four-month high of $1.3370. The common currency was last
Perhaps explaining the resilience of the euro, a Reuters
poll this week showed a vast majority of more than 60 economists
do not expect the European Central Bank to cut interest rates.
The survey also suggested the euro zone economy will return to
modest growth in the second half of this year.
The New Zealand dollar dropped 0.3 percent to $0.7923
losing a bit of steam after the Reserve Bank of New
Zealand (RBNZ) said it expects to hold interest rates steady at
a record low for the rest of the year.
RBNZ Governor, Graeme Wheeler, also said the central bank is
prepared to intervene should the kiwi dollar strengthen further.