* Yen falls to fresh 4-month low vs USD, 4-year low vs EUR
* Aussie hovers near 2-1/2 month low
* RBA Stevens 'open-minded' about intervening to weaken AUD
By Masayuki Kitano
SINGAPORE, Nov 22 The yen fell to a four-month
low versus the dollar on Friday, with the low-yielding Japanese
currency pressured by signs of improving risk appetite and
contrasting outlooks for monetary policy.
Investors also dumped the Australian dollar after the
country's central bank chief said he was "open-minded" about
intervening to weaken the currency.
The euro rose to 136.54 yen, its highest level
since October 2009, while the dollar scaled a four-month high of
101.36 yen, nearing its July peak of 101.54 yen.
There was little reason for investors not to continue using
the yen as a funding currency for carry trades after the Bank of
Japan stayed committed to its ultra-loose monetary policy on
In addition, there are expectations that the BOJ might add
to its monetary stimulus in coming months to achieve its 2
percent inflation target and to offset the fiscal drag from an
increase in the sales tax next April.
BOJ Governor Haruhiko Kuroda reiterated on Friday that the
central bank stood ready to make necessary adjustments if risks
to the economy threatened its inflation goal.
By contrast, while there is uncertainty about when the U.S.
Federal Reserve will start scaling back its bond-buying
stimulus, many market players expect the Fed to begin tapering
around March 2014, and possibly even sooner.
Minutes from the Fed's October policy meeting released on
Wednesday showed that policymakers felt there was room to begin
scaling back the $85 billion monthly bond purchase programme at
one of their next few meetings if warranted by economic
Signs of improving risk appetite have also likely prompted
market players to go short the yen, said Ray Farris, head of
Asia macro product research for Credit Suisse in Singapore,
adding that a recent technical breakout and options-related
flows have probably added to the dollar's momentum.
The Dow Jones industrial average set a record close
above 16,000 on Thursday, while Japan's benchmark Nikkei share
average touched a six-month peak on Friday. Such gains
in equities can whet investor appetite for risk and weigh on the
Farris said the dollar would probably rise to around 115 yen
in the next six months to a year, driven largely by the expected
divergence in monetary policy.
"Crucial to most people's forecasts is the expectation that
the BOJ will pre-empt the consumption tax hike with new monetary
ease," Farris said. A key risk would be if the BOJ were to
disappoint that expectation, he added.
The dollar rose 0.1 percent to 101.29 yen after
having surged 1.1 percent the previous day.
Part of the reason for the dollar's jump versus the yen on
Thursday was sporadic bouts of stop-loss dollar buying, said
Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
The dollar extended its gains on Friday after triggering
more stop-loss orders near 101.20 to 101.30 yen, Maeba said,
adding that there was later talk of some dollar offers.
One risk for the dollar versus the yen would be if U.S.
10-year Treasury yields were to decline, Maeba said. Another
risk would be if shorter-term U.S. yields were to head higher
and that in turn exerted downward pressure on equities, he
Against the dollar, the euro eased 0.1 percent to $1.3466
, but held above Thursday's low of $1.3399.
The euro gained some support after ECB President Mario
Draghi shot down a media report that said the central bank was
actively considering cutting a key interest rate below zero.
The Australian dollar hit a fresh 2-1/2 month low, staying
under pressure after Reserve Bank of Australia Governor Glenn
Stevens said on Thursday that he was "open-minded" about
intervening to weaken the currency.
While Stevens made clear that intervention was not without
risks, markets were in the mood to sell the Aussie especially
after a closely watched report showed China's factory sector
grew at a slower pace in November.
The Australian dollar was down 0.5 percent at $0.9190
, having fallen as low as $0.9177.