* Euro dips after S&P cuts long-term rating on European
* Yen under pressure as BOJ stands pat as expected
* Dollar edges up to fresh 5-year high vs yen
* Aussie wallows near 3-1/2-year low hit after Fed
By Lisa Twaronite
TOKYO, Dec 20 The dollar remained on a firm
footing in Asia on Friday, supported by a rise in U.S. Treasury
yields a day after the U.S. Federal Reserve said it would start
to cut its bond-buying stimulus, while the euro dipped after
Standard & Poor's cut its long-term rating on the European
"In our opinion, the overall creditworthiness of the now 28
European Union (EU) member states has declined," S&P said in a
statement as it cut its supranational long-term rating on the
European Union to AA-plus from AAA, citing rising tensions on
The euro was down about 0.2 percent against the dollar at
$1.3636, sinking to its session low of $1.3625 after
S&P's announcement, its deepest nadir against the dollar since
The yen stayed under pressure even against the euro after
the Bank of Japan held its monetary policy steady, as expected,
and also maintained its view that the economy is recovering
"The yen is a bit weaker, but today's moves are very small,
with many people in overseas markets already winding down ahead
of the holiday next week," said Ayako Sera, senior market
economist at Sumitomo Mitsui Trust Bank.
The greenback was up about 0.2 percent at 104.43 yen
after nudging up to a fresh five-year high of 104.60 yen on the
EBS trading platform. It last traded at those levels in October
The euro pared gains but was still slightly up on the day
against its Japanese counterpart to buy 142.42 yen,
within sight of its five-year high of 142.89 yen struck after
the Fed's move this week.
In contrast to what the Fed is doing, nearly two-thirds of
Japanese firms expect the BOJ to ease further in the first six
months of 2014, as it tries to achieve 2 percent inflation
within two years, a Reuters poll showed earlier this month.
Citi's Japan economics team expects the BOJ to opt for
additional quantitative easing measures in June or July next
year. The dollar is seen reaching an upside target of 108 yen
around the same time as the BOJ's steps, they said in a research
Meanwhile, rising U.S. Treasury yields gave the dollar a
lift, with the benchmark 10-year yield rising to a
three-month peak of 2.9512 percent.
The dollar is likely to keep benefiting from this, as well
as the Fed's eventual steps to tighten once its tapering is
"Combined with solid economic growth, we expect the Fed to
begin raising rates in mid-2015, earlier than it currently
anticipates," strategists at Barclays said in a note to
Markets are likely to price in the likelihood of higher U.S.
interest rates much sooner, they added, and "the normalisation
of the U.S. rates curve should add to USD gains."
The Australian dollar took back some lost ground but still
wallowed not far from a 3-1/2-year low hit after the Fed
revealed its stimulus reduction plans.
The Aussie fell as far as $0.8820, its lowest since
August 2010, but was last slightly higher on the day at$0.8872.