* USDJPY rises to highest level since July 2011
* Importers buying dollars, stops triggered above 80.41 yen
* Euro hits 2-1/2 mth high vs dlr on short covering rally
By Nia Williams
LONDON, Feb 24 The yen hit multi-month
lows against the dollar and euro on Friday, hurt by reported
selling by Japanese importers, although market players warned
that rock-bottom U.S. government bond yields may slow the pace
of any more losses versus the dollar.
The euro extended a surge to 10-week highs against the
dollar in the wake of better-than-expected German data on
Thursday which led investors to close some bets on losses for
the single currency.
So far this month the dollar has rallied around 5 percent
against the yen, helped by monetary easing from the Bank of
Japan as well as Japan's shrinking current account surplus,
exacerbated by rising crude oil prices.
The greenback rose to a session high of 80.71 yen,
pulling further away from the 2012 low of 76.03 hit on Feb. 1.
It was last up 0.8 percent on the day at 80.56 yen.
Short-term players triggered weak stop-loss orders above
Wednesday's peak of 80.41, helping the dollar break above a
major chart resistance point of 80.42 yen, which is the 50
percent retracement of its fall from the 2011 high around 85.50
yen to the all-time low of 75.31 yen.
Some analysts said the rapid pace of gains was likely to
slow given U.S. Treasury yields, which traditionally
have a strong correlation with moves in dollar/yen, are still
fairly low. Those yields are seen remaining capped due to the
Federal Reserve's pledge to keep rates exceptionally low until
at least 2014.
"Traders are talking about a move to 82 yen, but the
interesting thing will be to see what happens after that. U.S.
yields have not really justified the move," said Geoff Kendrick,
FX analyst at Nomura.
"But as long as we do not get any weak U.S. data, and we do
not have anything until ISM next week, dollar/yen can keep
The euro rose 1 percent against the yen to a fresh 3-1/2
month high of 107.98, more than 10 yen off this
year's low of 97.04 yen hit on Jan. 16.
Meanwhile, the dollar hit a near 3-1/2 month trough against
the Swiss franc of 0.8990 francs, with the franc being
seen as an alternative safe haven to the yen after the Bank of
Japan's easing measures.
Against the dollar the euro extended hefty gains made a day
earlier after an improved German Ifo business sentiment survey
triggered a short-covering rally, where players give up on bets
that the currency will weaken.
Market players said the euro rally had good momentum after
it broke through the 100-day moving average around $1.3306 on
Thursday, and took out a reported option barrier at $1.34 in
early European trade on Friday.
The euro was last up 0.2 percent on the day at
$1.3399, just off a session high of $1.3405.
Although the Ifo data raised hopes growth in the euro zone's
largest economy was picking up, the European Commission warned
the region could be heading for recession as the debt crisis
dragged on, clouding the euro's longer-term.
Some analysts said the euro's resilience was due to better
risk appetite ahead of the European Central Bank's second
long-term, low-rate refinancing operation next
Banks are expected to borrow around half a trillion euros
and while the funds were likely to boost the euro in the
short-term, the extra liquidity could store up problems in
"The huge mass of liquidity pumped into the market is some
kind of relief in the short-term, if you have enough liquidity
equities will always be happy," said Lutz Karpowitz, currency
analyst at Commerzbank.
"But we are definitely going to face inflationary pressures
in the future."
The Australian dollar rose 0.3 percent to $1.0737,
after the Reserve Bank of Australia governor said monetary
policy was broadly neutral, stoking speculation the central bank
may hold off from cutting interest rates in the near-term.