* Expectations of more BOJ easing may weigh on yen
* But some see risk of further near-term pullback in dlr/yen
* Euro supported by view ECB will keep rates unchanged
By Masayuki Kitano
SINGAPORE, Jan 9 The dollar rose against the yen
on Wednesday after its retreat this week from a 2-1/2 year high
lured buyers who had been waiting for a chance to buy on dips,
with the outlook for more Japanese monetary easing expected to
weigh further on the yen.
The dollar was up 0.4 percent at 87.44 yen after
having slipped to an intraday low near 86.83 yen, its lowest in
nearly a week and a loss of about 1.9 percent from last Friday's
peak of 88.48 yen, which was its highest since July 2010.
"In terms of the drop that we saw in dollar/yen, there were
a lot of dollar buyers coming in," said Mitul Kotecha, head of
global foreign exchange strategy for Credit Agricole in Hong
"So there do seem to be some dollar buyers out there who
were looking for the dip in dollar/yen to pick it up," he said.
Still, the risk of a further near-term pullback in the
dollar cannot be ruled out, Credit Agricole's Kotecha said.
Possible support for the dollar lies at 86.54 yen, its intraday
low on Jan. 2, and a breach of that level could open the way for
a drop to around 85.90 yen, he added.
A trader for a Japanese bank in Bangkok said some short-term
traders seemed to be expecting a further pullback in the dollar
versus the yen, while longer-term traders appeared content to
buy the greenback on dips.
The euro rose about 0.5 percent to 114.42 yen,
but was still some distance away from an 18-month high of
115.995 yen set on trading platform EBS on Jan. 2.
The dollar and the euro had come under pressure against the
yen earlier in the week as investors locked in profits in the
wake of their steep gains versus the Japanese currency over the
past couple of months.
At its peak against the yen on Friday, the dollar had gained
nearly 12 percent from its trough in early November, and traders
said the rally had been ready to pause for breath.
"Late last year, the yen sharply weakened in thin
conditions. If you had to take a market position, could you see
any reason to buy yen? No. So the yen was sold," said Kimihiko
Tomita, head of foreign exchange for State Street Global Markets
"But markets can't keep moving for weeks on the same
factors, even when the overall trend remains the same, so in the
short term, the yen started moving up again."
Japan's new government led by Prime Minister Shinzo Abe is
rushing this month to complete a new policy accord with the Bank
of Japan and an economic stimulus package that will be the first
test of whether he can deliver on his ambitious economic agenda
aimed at pulling the country out of deflation.
Sources familiar with the BOJ's thinking said the central
bank will likely adopt a 2 percent inflation target at its Jan.
21-22 rate review, double its current goal, and issue a
statement with the government pledging to pursue bold monetary
The BOJ will also consider easing monetary policy again this
month, with any easing likely to take the form of another
increase in its 101 trillion yen ($1.2 trillion) asset buying
and lending programme, the sources said.
The euro rose 0.1 percent against the dollar from late U.S.
levels, changing hands at $1.3092, with support at $1.30
holding after the European unit fell to a three-week low of
$1.2998 on EBS on Friday.
The euro is likely to be supported this week by expectations
that the European Central Bank will hold off on cutting interest
rates at its regular policy meeting on Thursday, although some
investors and economists believe cuts will come later this year.