* Dollar/yen threatens to fall below 200-day average
* Yen helped by dwindling chance of near-term BOJ easing
* Dollar hampered by fall in U.S. bond yields, dovish Fed
* ECB easing expectations, election jitters hurt euro
(Updates prices, quotes)
By Hideyuki Sano and Shinichi Saoshiro
TOKYO, May 20 The yen held near a 3 1/2-month
high against the dollar and the euro on Tuesday, supported by
diminishing expectations of stimulus by the Bank of Japan as
well as falling U.S. and European bond yields.
The dollar traded at 101.54 yen, a day after falling
to 101.10 yen, its lowest level since early February - briefly
breaking below its 200-day moving average at 101.25 yen.
The chart break was a talking point among yen traders given
the dollar has not held below that average except for brief
forays in October-November last year. The dollar has largely
been in a strong position since late 2012 when Japanese Prime
Minister Shinzo Abe's embarked on aggressive fiscal and monetary
easing to revive growth.
As a result a sustained fall below that mark may portend a
turning point in the yen's weakening trend.
"The last few times the dollar fell below the 200-day moving
average, its stints have been brief. For now the dollar looks to
have hit a technical bottom, but a downward bias will be formed
if it closes the next one or two sessions below the moving
average," said a trader at a large Japanese bank in Tokyo.
The uptick in the yen also comes at a time of decreasing
expectations of near-term monetary easing by the Bank of Japan.
The BOJ is widely expected to keep its policy unchanged at a
two-day policy meeting starting on Tuesday, with the market now
looking to Kuroda's news conference after the meeting.
"Very few players expect the BOJ to do anything tomorrow, so
positioning before the policy meeting has been limited. Many
would rather wait and react to what the BOJ has to say after the
meeting," the trader at the large Japanese bank said.
Governor Haruhiko Kuroda has stuck to an upbeat assessment
on the Japanese economy in recent weeks, dousing immediate
"If Kuroda makes dovish comments tomorrow, then the
dollar/yen may manage to stay above the 200-day average. But if
he intentionally stresses his optimistic economic views, markets
will take it as a sign he accepts a higher yen and a fall in
stocks," said Osamu Takashima, head of FX strategy at Citigroup
Securities in Tokyo.
The dollar has been facing some pressure of its own from
falls in U.S. Treasury yields.
Mixed economic data and a generally dovish outlook from the
Federal Reserve have weighed on U.S. bond yields, keeping dollar
bulls in check.
On Monday, Dallas Fed President Richard Fisher and San
Francisco Fed President John Williams added to the dovish tone.
Fisher, known for his hawkish views on monetary policy, said
there have been positive aspects to the Fed's easy policy, while
Williams, a dove, acknowledged weakness in the U.S. housing
Williams added that it was not appropriate for the Fed to
start raising interest rates until the second half of next year.
The benchmark U.S. 10-year yield, which hit a six-month low
of 2.473 percent last week, has stood near that
level since then.
The euro also fell to 3 1/2-month low of 138.62 yen on
Monday and last fetched 139.23 yen.
Against the dollar, the common currency was steadier at
$1.3711, little changed over the past few days, though it
was not far from 2 1/2-month lows of $1.3648 hit last Thursday.
The euro has been pressured by soft euro zone growth data
published on Thursday and expectations that the European Central
Bank will adopt stimulus early next month.
The euro could come under more pressure ahead of potentially
destabilising European Parliament elections later this week,
where votes for anti-austerity, eurosceptic parties look set to
Yields on Italian and Spanish government bonds rose on
Monday, as investors took profits on recent price gains as
investors were concerned a rise of eurosceptic forces could
thwart reform efforts.
(Editing by Eric Meijer)