* Dollar/yen hits 2 1/2-yr high, euro/yen hits 21-month peak
* Stop-loss buying helps add to greenback's rise
* Traders cite dollar/yen option barrier at 90.75
By Masayuki Kitano and Lisa Twaronite
SINGAPORE/TOKYO, Jan 25 The yen hit a 2 1/2-year
low against the dollar and a 21-month low versus the euro on
Friday, as the market remained focused on Japan's pursuit of
reflationary economic policies.
Stop-loss dollar buying added to the yen's losses, traders
said. The greenback climbed to its strongest level since June
2010 of 90.695 yen on trading platform EBS, a gain of 14 percent
versus the yen compared with levels seen in mid-November.
The dollar last fetched about 90.54 yen, up 0.2
percent from late U.S. trade on Thursday.
Traders said there was an option barrier at 90.75 yen,
suggesting that options players might sell the dollar if it
rises close to that level. A breach of that level, however,
could open the way for the dollar to rise further.
The yen came under renewed pressure after reports on
Thursday quoted Japan's deputy economy minister, Yasutoshi
Nishimura, as saying the yen's decline is not over, and that a
dollar/yen level of 100 would not be a concern. Nishimura was
also quoted as saying that the dollar would only add to domestic
import costs if it rose to around 110-120 yen.
"Every time dollar/yen has a correction, it seems that one
or other Japanese official comes out and talks the (Japanese)
currency down," said Callum Henderson, global head of FX
research for Standard Chartered Bank in Singapore.
"Undoubtedly, there is a campaign on the part of the
Japanese authorities to continue to focus the market's attention
on the need to reflate the economy," he added.
The yen had bounced earlier in the week after the Bank of
Japan on Tuesday doubled its inflation target to 2 percent and
made an open-ended commitment to buying assets from next year.
Although it was the BOJ's boldest policy attempt yet to end
years of economic stagnation, the action was deemed a
disappointment by some due to the lack of an immediate expansion
of asset purchases.
BOJ Governor Masaaki Shirakawa on Friday reaffirmed the
bank's commitment to maintain powerful monetary easing, but he
warned that preventing credit bubbles was also among key roles
for central banks across the world.
The yen showed little reaction to Shirakawa's remarks.
The euro rose to as high as 121.32 yen, its highest level
versus the Japanese currency since April 2011. The euro last
stood near 121.03 yen, up 0.2 percent from late U.S.
Against the dollar, the euro held steady at $1.3368.
MORE BOJ EASING EYED
The yen got no help from data showing that Japan remains
entrenched in deflation, keeping pressure on the BOJ to take
more steps to meet its inflation target.
Japan's core consumer prices fell 0.2 percent in December
from a year earlier, down for a second straight month, and a far
cry from the central bank's new price goal.
"The BOJ should continue to ease aggressively under
political pressure," said Masashi Murata, a currency strategist
at Brown Brothers Harriman in Tokyo.
The Japanese price data was less significant for currency
markets than Thursday's U.S. economic data, which contributed to
the yen's weaker tone in Asian trading, Murata added.
A report showing that new claims for jobless benefits fell
to a five-year low last week lifted U.S. bond yields, which in
turn helped lift the dollar against the yen.
The yen's precipitous descent since late last year has not
escaped the attention of the global community, with German
Chancellor Angela Merkel singling out Japan on Thursday as a
source of concern.
"I don't want to say that I look towards Japan completely
without concern at the moment," Merkel said at the World
Economic Forum in Davos, when asked whether currency
manipulation risked distorting competition.
Japanese Finance Minister Taro Aso, shrugging off concern
from overseas about currency wars, said on Friday that the BOJ's
monetary easing is aimed at pulling the country out of deflation
but not at manipulating currencies.