* Yen off multi-month highs vs USD & EUR
* Minutes of Fed meeting lift U.S. stocks, help improve risk
* HSBC's China PMI report next in focus
By Ian Chua
SYDNEY, May 22 The yen was on the defensive in
early Asian trade on Thursday, having retreated from multi-month
highs against the euro and dollar as an improvement in risk
appetite dampened demand for the safe haven currency.
The dollar fetched 101.46 yen, well off a 3-1/2 month
low of 100.80 plumbed overnight. Similarly the euro at 138.80
was off its 3-1/2 month trough of 138.15.
The reversal had helped both the dollar and euro end flat
against the Japanese currency in New York. Traders said the move
also highlighted the market's reluctance to break the prevailing
Against the greenback, the euro staged a recovery from a
three-month low of $1.3634 to $1.3686, ending the session
in New York with only a modest 0.2 percent decline.
Trading was a bit choppy around the release of minutes of
the Federal Reserve's late April meeting, which showed
policymakers discussed exit strategies from ultra-loose monetary
But they also made clear that the Fed was not signalling
that it was ready to "normalize" policy or raise interest rates
any time soon.
"With the Fed not concerned about the inflation outlook, and
the first rate rise not expected until mid-late 2015, the USD
lost ground after the minutes, while U.S. stocks gained," said
Spiros Papadopoulos, senior economist at NAB in Melbourne.
U.S. stocks rose with the Dow Jones industrial average
rallying 1 percent, giving Asian stocks a positive lead.
Speeches by Fed officials, including Minneapolis Fed
President Narayana Kocherlakota, also underscored the Fed's
"Against this backdrop, U.S. front-end yields have remained
stubbornly low, unable to sustain a brief tick higher heading
into the minutes release," analysts at BNP Paribas wrote in a
note to clients.
This, in turn, was keeping the dollar pinned down, traders
The standout performer was sterling, which hit a 5-1/2 year
high on a trade-weighted basis thanks in part to data
showing a surge in retail sales last month.
Also helping, minutes of the Bank of England's May meeting
revealed that some policymakers were starting to think that the
case for keeping rates on hold was now more finely balanced,
suggesting the BOE may be a step nearer to raising rates.
Against the euro, sterling climbed to a 17-month high of
80.83 pence per euro. It hit a near two-week high of
$1.6922 against the dollar.
In the hours ahead, all eyes will be on a private survey of
China's factory activity due around 0145 GMT, followed by euro
zone purchasing managers surveys.
Any disappointment in the Chinese report could see risk
aversion quickly return to the fore, an outcome that could give
the yen a boost.
(Editing by Shri Navaratnam)