* Dollar/yen retreats from Friday's high after swift rally
* Dollar/yen could fall further if BOJ disappoints
* Euro falls vs dollar, to consolidate at around $1.3000
By Anooja Debnath
LONDON, Jan 7 The dollar fell against the yen on
Monday on profit-taking after its swift rise to a 2-1/2 year
high last week -- a rally driven by expectations of aggressive
monetary easing by the Bank of Japan.
The dollar was down 0.4 percent at 87.72 yen, off
Friday's peak of 88.48 yen on trading platform EBS, which was
its strongest since July 2010.
Traders said the dollar could extend falls if it broke below
reported stop loss sell orders at 87.50 yen.
Strategists said the dollar was likely to give up some of
its recent gains against the yen as investors, who return after
the holidays with fresh allocations this year, take profit on
its rapid ascent.
Traders also said the yen found some support on worries that
Japanese mobile operator Softbank Corp's deal to buy 70
percent of U.S. carrier Sprint Nextel Corp could run into
"From mid-October (last year) until last week's high
dollar/yen has a nearly 13.5 percent appreciation in a very
short period of time so it is obvious we will see some
pullback," said Audrey Childe-Freeman, head of foreign exchange
strategy at BMO Capital Markets.
She said the dollar's steep rise against the yen was purely
based on expectations of aggressive policy easing by the BOJ and
there was a risk their actions might fall short of market
forecasts, leading the dollar to weaken against the Japanese
"There is a risk that markets got a little bit carried away
and that we don't see as much as we were hoping for (from the
BOJ) and we see a pullback in dollar/yen."
The BOJ meets on Jan. 21-22.
But some analysts and traders said the dollar's uptrend
would remain intact.
"I think 90 yen might be reached pretty soon," said Hiroshi
Maeba, head of FX trading Japan for UBS in Tokyo, adding that
the dollar could head toward 95 yen over the next six months and
possibly as early as March.
The dollar's gains accelerated last week after minutes from
the U.S. Federal Reserve's December meeting showed some
policymakers had considered ending their bond-buying programme
as early as this year.
By contrast, many investors are betting Japan's new
government, led by Prime Minister Shinzo Abe, will seek to
weaken the yen and push through aggressive fiscal stimulus, and
pressure the BOJ to do the same on the monetary side.
The euro, which fell after last week's Federal
Reserve minutes, eased 0.3 percent to $1.3034, after falling to
a three-week low of $1.2998 on trading platform EBS on Friday.
Analysts said it could stay aroud these levels until a European
Central Bank meeting on Thursday.
"Euro/dollar will likely consolidate around $1.30 until the
ECB meeting. People back from their holidays would wait and
watch (for news out of the euro zone) before adding any fresh
positions," BMO's Childe-Freeman said.
Analysts said the ECB meeting could refocus the market's
attention on the fragility of the euro zone economy and the
possibility of an interest rate cut in the coming months,
weighing on the euro.
Strategists cited chart support at around $1.2987, its
55-day moving average, while traders said a reportedly large
options expiry at $1.30 could keep the euro close to that level.
The euro dropped 0.8 percent to 114.28 yen,
moving away from an 18-month high of 115.995 yen set on EBS last