* Markets positioning for bold action from BOJ
* Yen near 2-1/2 year low vs dollar
* Dollar/yen may target 90.75 and then 93-95 -trader
* But profit-taking may weigh on dlr/yen after BOJ
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, Jan 18 The yen hovered near a
2-1/2 year low against the dollar on Friday following a dramatic
selloff as markets positioned for the Bank of Japan to take bold
policy action to tackle deflation.
Sources familiar with the BOJ's thinking told Reuters the
central bank, under relentless pressure from Prime Minister
Shinzo Abe, will consider making an open-ended commitment next
week to buy assets until 2 percent inflation is foreseen.
Such a move would represent a marked turnaround for a
conservative central bank that has repeatedly resisted calls for
bolder action. It would also far exceed expectations the BOJ
would opt for a more conventional step of topping up its
asset-buying programme at its Jan 21-22 meeting.
The dollar edged up 0.2 percent to 90.00 yen,
hovering near the previous day's high of 90.14 yen set on
trading platform EBS, the greenback's strongest level against
the yen since June 2010.
On Thursday, the dollar had jumped 1.7 percent versus the
yen, its biggest one-day percentage gain since Oct. 31, 2011,
the day the dollar hit a record low of 75.311 yen and Japan
spent a record 8 trillion yen in unilateral intervention to curb
the yen's rise.
While the dollar could run into some profit-taking after the
BOJ's policy decision on Tuesday, any decline may turn out to be
mild, said Hiroshi Maeba, head of FX trading Japan for UBS in
"There might be a dip after the BOJ, but the drop could turn
out to be surprisingly shallow, and I think from there the
direction will be a rise towards 93 yen to 95 yen," he said.
A possible short-term target for the dollar is 90.75 yen,
Maeba said, adding that a breach of that level may open the way
for the greenback to head higher.
On technical charts, initial resistance for dollar/yen is
seen around 90.34, the 76.4 percent retracement of its May
2010-Oct 2011 fall. A break there brings the 2010 high of 94.99
If the BOJ were to shift to an open-ended asset buying
scheme, an additional focal point would be the pace of asset
purchases, said Rob Ryan, strategist for RBS in Singapore.
"All they really have is signalling. That they are going to
do something different, or they're going to do it in a different
way," Ryan said.
"What will be important is an open-ended commitment...plus
an increase in the rate of purchases," Ryan said.
Traders said the risk now, of course, is if the BOJ
"We think there is some risk of disappointment at the BOJ
meeting and scope for a yen rally. It is now consensus that the
BOJ will move to a 2 percent inflation target. However, more
aggressive measures may not come until closer to the nomination
of the new governor/deputy governors in Q2," said Kiran Kowshik,
strategist at BNP Paribas.
Underscoring the yen's weakness, the Australian dollar
scaled a high around 95.00 yen on Friday, its highest
level since August 2008.
Earlier, the Australian dollar gained a brief lift against
the greenback after data showed that China's economy grew 7.9
percent in the fourth quarter from a year earlier, snapping
seventh straight quarters of slowing expansion.
The Aussie dollar, however, later sagged back and last
fetched $1.0516, down 0.3 percent on the day.
The euro edged up 0.1 percent to $1.3380, hovering
near an 11-month high of $1.3404 set on Monday.