* Dollar rises after Fed minutes
* Fed minutes show some policymakers concerned about QE
* Dollar/yen hits highest level since July 2010
* Strong U.S. jobs data could lift dollar further
By Anooja Debnath
LONDON, Jan 4 The dollar extended gains to hit
is highest level in nearly 2-1/2 year against the yen and rose
versus the euro on Friday after U.S. Federal Reserve minutes
indicated growing unease about the impact of further stimulus.
The dollar could gain further if U.S. jobs data, due 1330
GMT, beats expectations. The Fed has embarked on a $1 trillion
stimulus p r ogramme to lower the U.S. unemployment rate, so a
strong jobs number may boost chances the Fed could halt its
asset buying sooner than expected and help the dollar.
The dollar broke past reported options barrier at 88
yen to hit a high of 88.34 yen, up 1.2 percent on the day and
its highest since mid-July 2010. Traders cited more option
barriers at 88.50 and 89 yen.
The U.S. currency also rose to a three-week high against the
euro. The euro fell 0.2 percent to a low of $1.3006 with
near-term support expected at its 55-day moving average of
$1.2986, traders said.
Minutes from the Fed's last meeting surprised markets after
signalling reluctance among some policymakers to further expand
its asset purchases.
In light of the Fed minutes, markets will pay particular
attention to the U.S. non-farm payrolls report which is expected
to show the American economy added 150,000 jobs in December,
according to a Reuters survey, up from November's 146,000.
The unemployment rate is expected to stay at 7.7 percent.
"After the minutes, markets perhaps expect the Fed to reduce
its bond purchases or shorten the time it will continue such
purchases," said Richard Falkenhall, FX strategist at SEB.
"A strong payroll figure is good for risk appetite as it
shows the U.S. economy is recovering, but it will also be dollar
positive which is not the traditional relationship," Falkenhall
Usually a better-than-expected U.S. data drives the dollar
lower against most major currencies. But any recovery in the
jobs market could help the dollar as it would lessen the need
for more stimulus.
The dollar's broad gains drove its index, a measure
of the U.S. currency's value against six major currencies, to a
six-week high of 80.845 with U.S. investment banks cited as
The dollar's rise post the Fed minutes was especially sharp
against the yen. The yen has struggled in recent months on
increasing prospects the new government of Prime Minister Shinzo
Abe will push to weaken Japan's currency and implement
Further weakness in the yen is likely on the cards as some
analysts expect the dollar to remain firm for now.
"We have seen quite a broad-based dollar rally after the
minutes which has ignited a fresh debate about how much
liquidity the Fed is going to pump into the economy," said
Daragh Maher, FX strategist at HSBC.
"Breaking through 88 in dollar/yen is a significant move. It
was a target for a number of people in the market and the
question is now whether we have a mindset of taking profit or we
look to extend," he added.
Some strategists however added that the current yen selling
was perhaps overdone and a further fall in the yen will depend
on a substantial change in BOJ policy.
The BOJ's next meeting is due Jan. 21-22.
The euro rose also 0.9 percent to 114.80 yen, but
was still far below an 18-month high of 115.995 yen set on
trading platform EBS on Wednesday.