* Yen poised to end week sharply lower vs majors
* Markets expecting big LDP win in Japan Sunday election
* Euro headed for biggest weekly gains vs dlr since late Nov
By Anirban Nag
LONDON, Dec 14 The yen fell against the dollar
and the euro on Friday and was likely to stay under pressure on
expectations that the Bank of Japan would aggressively ease
monetary policy in coming months.
The euro was steady after euro zone flash PMI numbers were
broadly in line with expectations. Traders were turning
slightly positive on the single currency following a successful
Greek debt buyback and after an agreement was clinched on a
single euro zone banking supervisor.
The dollar bought 83.85 yen, up 0.3 percent on the
day, having risen as high as 83.95, its highest level since
March 21. It was not far from its March 2012 peak of 84.187,
which is seen as a major resistance level.
Traders cited an options barrier at 84 yen with the options
market also showing increasing bias for more yen weakness with
investors increasingly buying yen puts.
"The yen is the only game in town with volumes thinning
out," said Peter Allwright, head trader at fund manager house
RWC Partners. "Investors are short yen heading into the election
and even in the longer term we expect the yen to weaken."
Bets the yen will weaken have risen significantly as Japan
looked set to get a prime minister keen to push for more money
printing by the central bank to stimulate the moribund economy.
Japanese media reported the conservative Liberal Democratic
Party (LDP) is set for a stunning victory in elections on
Sunday, cementing speculation that LDP leader Shinzo Abe will be
in a strong position to push for bold monetary easing.
The dollar has risen 5.5 percent against the yen in the past
month and technically there are signs the pair has risen too
fast in a short period of time, with its relative strength index
standing well above the "overbought" mark of 70.
Some said the yen may regain some lost ground if the Bank of
Japan disappointed next week. The BoJ is widely expected to ease
monetary policy next week, but the amount of asset purchases it
decides to do has left room for disappointment.
"Given high expectations, it is hard to think the BOJ will
come up with surprises. The BOJ is already buying shares, the
only central bank that's doing such things," said Ayako Sera,
market economist at Sumitomo Mitsui Trust Bank.
At present, all the expectations about BOJ easing have
created "a bit of a festival but the market may be in for a
hangover after that," she added.
EURO HOLDS GROUND
The euro also rose to an eight-month high of 109.63 yen
, and was on track to end the week almost 3 percent
higher on the yen. It was last trading at 109.62 yen, up 0.2
percent on the day with option barriers at 110 yen cited.
The euro was also on track for its biggest weekly gains
against the dollar in three weeks.
It rose to a high of $1.3120, its highest level in
more than a week and was last trading at $1.3082, flat on the
day. Traders cited offers to sell from central banks at
$1.3135/40 with reported option barriers at $1.3150 and $1.3200
were also cited.
"The euro is well supported and the PMIs were decent," said
Beat Siegenthaler, currency analyst at UBS. "In the short term
it looks as a buy on dips with positive developments (in) the
Greek debt buyback and a single banking supervisor also helping
Markit's Flash Composite Purchasing Managers' Index, which
polls around 5,000 businesses across the 17-nation bloc and is
viewed as a reliable growth indicator, rose to a nine-month high
of 47.3 this month, beating forecasts for a rise to 46.8.
But the index still pointed to a contraction within the
currency bloc, keeping alive risks of an interest rate cut by
the European Central Bank in coming months.