* Euro/yen pulls away from previous day's 18-month high
* Yen takes breather after recent slide
* Dollar/yen pauses after hitting 29-month peak
By Masayuki Kitano
SINGAPORE, Jan 3 The yen edged higher after
hitting a 29-month low versus the dollar on Thursday, having
come under pressure earlier when U.S. lawmakers forged a deal to
avoid a fiscal crunch, fuelling demand for riskier investments.
The dollar slipped 0.1 percent to 87.21 yen. The
dollar rose to as high as 87.36 yen earlier on Thursday on
trading platform EBS, the greenback's highest level against the
Japanese currency since late July 2010.
"Technically dollar/yen looks somewhat overbought here. It's
gone a long way in a very short time," said Callum Henderson,
global head of FX research for Standard Chartered Bank in
Singapore, adding that the dollar could see some consolidation
in the near term before heading higher.
"Over the next few months, I think the bias is still for a
higher dollar/yen rate," he said.
The yen also edged higher on the crosses. The euro fell 0.5
percent to 114.60 yen, pulling away from an 18-month
high of 115.995 yen set on trading platform EBS on Wednesday.
Against the dollar, the euro slipped 0.3 percent to $1.3139
, retreating from a two-week high of $1.3300 set on
Wednesday, with one trader saying that stop-loss selling helped
add to the euro's decline on Thursday.
The yen had tumbled on Wednesday after U.S. lawmakers passed
a bill on Tuesday to avoid the "fiscal cliff", bolstering
investors' appetite for risky assets.
The yen has also taken a hit from expectations that a new
Japanese government led by Prime Minister Shinzo Abe would push
the Bank of Japan into more forceful monetary easing to beat
With a number of potentially yen-bearish events coming up
over the next few months, including the Bank of Japan's policy
meeting on Jan. 21-22 and a forthcoming change in BOJ
leadership, the dollar is likely to head higher versus the yen,
said a trader for a Japanese bank in Bangkok.
To be sure, since the dollar's recent rise against the yen
has been surprisingly fast, there is also a risk that the speed
of any pull-back in the dollar could be rapid, the trader said.
"But that is basically a risk scenario, and while the dollar
could see a dip of one yen or so, I think it will probably
overcome such declines and keep heading higher," he said.
The dollar climbed 12.8 percent against the yen in 2012 for
its biggest yearly percentage rise since 2005.
The bulk of those gains came late in the year, with the
dollar having risen more than 10 percent versus the yen from a
trough hit in early November.