* Investors optimistic on 2014 global economy, positive on
* Yen hampered by expectations of more BOJ easing
* Euro helped by year-end buying, ECB comments
By Hideyuki Sano
TOKYO, Dec 30 The yen dropped to five-year lows
against the dollar on Monday, extending 2013's losses to more
than 17 percent on a mix of improving sentiment on the global
economy, rising investor risk appetite and expectations of more
Bank of Japan stimulus.
Unlike the past few years when financial markets lurched
from debt crisis in Europe to U.S. political deadlock, investors
are generally upbeat on the global economic outlook next year -
at least for now.
The euro and its European peers held near two-year highs
against the dollar, supported by comments from the European
Central Bank chief that there is no urgent need to cut rates.
The dollar rose to 105.415 yen, its highest level since
October 2008, and last stood at 105.32 yen. The yen has
been the weakest major currency this year.
"For the moment, the market wants to carry on the latest
trend as far as it can," said Masafumi Yamamoto, chief
strategist at Praevidentia Strategy in Tokyo.
The euro stood at 144.82 yen, having hit a
five-year high of 145.675 yen on Friday. The Swiss franc rose
above 118 yen, to be at its highest in more than 30
A brighter global economy tends to lead to higher foreign
investment by Japanese investors, depressing the yen. Rises in
U.S. bond yields also underpin the dollar against the
The 10-year U.S. notes yield hit a two-year high above 3.0
Further, the BOJ's pledge to keep rates low is seen
encouraging yen-carry trades, in which investors borrow the yen
and buy higher-yielding assets, and there is also a view Japan's
central bank will increase it stimulus programme in 2014.
News that Japan's most influential business lobby will
encourage members to raise workers' base pay for the first time
in six years added to positive risk sentiment.
The euro traded at $1.3765, having shot up as high as
$1.3894 in thin year-end trade on Friday, its highest since
October 2011. It has risen more than 4 percent against the
dollar in 2013 and is set for a second straight year of gains.
The end-year rise in the common currency likely reflects
some last-minute position adjustments by European banks, which
are thought to be repatriating funds to shore up capital ahead
of an ECB asset review.
ECB President Mario Draghi said in an interview published on
Saturday that he saw no urgent need to cut the euro zone's main
interest rate further and no signs of deflation.
Still, the euro could falter if risk of deflation increases.
The bloc's inflation rate has been steadily falling from 3
percent in 2011 to below 1 percent in the last couple of months.
Inflation data is due on Jan. 7.
"If Italian inflation data on Friday falls short of
expectations, then people may think the euro zone inflation data
next week could disappoint, possibly reversing the euro," said
Elsewhere, the British pound rose to $1.6577, its
highest since August 2011, while the Australian dollar was
lethargic near three-year lows, fetching $0.8846. It
has shed almost 15 percent this year.