* BOJ holds off from additional easing as expected
* Yen shows subdued reaction, stays near 7-mth low vs dlr
* Euro eases after Moody's downgrades France
By Masayuki Kitano
SINGAPORE, Nov 20 The yen hovered near a
seven-month low against the dollar on Tuesday and was likely to
stay under pressure in the near term, dealers said, amid
mounting political calls for more aggressive monetary expansion.
The yen showed little reaction after the Bank of Japan held
off from additional monetary stimulus, in line with
expectations, after having eased in September and October.
The dollar last traded at 81.28 yen, down 0.1 percent
from late U.S. trade on Monday. The greenback was within sight
of the previous day's high of 81.59 yen, the dollar's highest
level versus the yen since late April.
The yen has slid over the past week on market expectations
that a likely new Japanese government after a December election
would push the BOJ toward more forceful monetary stimulus, and
analysts said the dollar may have more room to rise against the
Japanese currency in the near term.
"I think we are going to see new highs," said Todd Elmer,
currency strategist at Citi in Singapore, referring to the
dollar's outlook versus the yen. "We are going to break out of
the topside of the range around 82. The risk is that we could
extend a little beyond that point."
It may be prudent, however, to be cautious about selling the
yen based solely on BOJ easing expectations, Elmer said.
"Ultimately, the yen is not strong because policy is
especially tight in Japan, it's strong because policy is
exceptionally easy elsewhere," he said, adding that it remained
unclear whether additional BOJ easing would be effective in
weakening the yen.
Japan's opposition Liberal Democratic Party (LDP), which has
a commanding lead in opinion polls ahead of the election on Dec.
16, has become increasingly vocal in its calls for more monetary
Shinzo Abe, the leader of the LDP, has called on the BOJ for
bolder policy action, including "unlimited easing", pushing
interest rates to zero or below zero and directly underwriting
bonds issued to fund public works spending.
In the latest sign of the LDP's stance on monetary policy,
the Nikkei newspaper reported that the party is likely to
include in its campaign platform a pledge to consider revising a
law guaranteeing central bank independence.
While there is the possibility of the LDP toning down its
rhetoric after the election, such calls for forceful BOJ easing
are likely to persist for now and support the dollar against the
yen, said Rob Ryan, a strategist at RBS.
"I don't see a reversal right now," Ryan said, adding that
the dollar will probably head into the election a bit higher
than where it stands now.
Against this backdrop, the dollar may find support against
the yen on any pull-back.
Some Japanese importers and investors may have been caught
off guard by the dollar's recent surge against the yen, said a
trader for a Japanese bank in Singapore.
"So, downside dips will be bought into," the trader said. At
the same time, some traders are looking to sell the dollar if it
rises towards 82.00 yen, the trader added.
The euro dipped 0.2 percent to $1.2790, having eased
after Moody's cut France's sovereign rating by one notch to Aa1
from Aaa, citing an uncertain fiscal outlook and deteriorating
The single currency's losses were limited, however. Analysts
said the downgrade did not come as a surprise, with Standard &
Poor's having already downgraded France in January.