* Dollar stalls near 100 yen but further gains expected
* Euro helped as Italy 3-year debt costs fall at auction
* Euro hits 3-year peak versus yen, 6-week high vs dollar
* Yen slides against higher-yielding Aussie, NZ dollars
By Jessica Mortimer
LONDON, April 11 The dollar paused on Thursday
before an expected assault on the 100 yen level, but the yen
extended its falls against other currencies and hit a three-year
low against the euro.
The euro was helped as Italy's three-year debt costs fell to
their lowest since January at an auction. It also rose to a
six-week high against the dollar.
The U.S. currency pulled back slightly from a four-year high
against the yen struck on Wednesday, as investors took profit
after a 7 percent surge since the Bank of Japan unveiled a $1.4
trillion stimulus plan last week. But analysts said it was only
a matter of time before 100 yen was broken.
"The 100 yen level is a psychological level that might take
a bit of time to break, but this is still a very significant
qualitative change by the Bank of Japan that is not fully priced
in yet," said Ulrich Leuchtmann, head of currency research at
"Therefore I do see dollar/yen moving higher."
The dollar was last down 0.2 percent at 99.51 yen,
off a four-year high of 99.88 yen.
Traders said substantial options expiries due later in the
day between 98 and 99.50 yen could keep the dollar pinned lower
Commerzbank's Leuchtmann said it was possible that the
dollar could rise to 115 yen or higher by the end of the year,
but said it was difficult to predict the extent of the move.
Japan's aggressive monetary easing contrasts with
expectations the Federal Reserve may slow its bond-buying later
this year. These expectations were given a boost as Fed minutes
on Wednesday showed a few policymakers looking to taper asset
purchases by mid-year.
However, analysts said investors may reassess this as the
minutes did not reflect a dismal March payrolls report which was
released after the meeting.
Traders cited hefty offers to sell dollars at 100 yen from
Japanese exporters. However, they added most investors were
looking to use dips to add to long dollar positions.
A rise above 100 yen would take the U.S. currency to highs
not seen since mid-April 2009 and pave the way for a test of the
April 2009 peak of 101.45 yen.
The euro rose to its highest in more than three years
against the yen at 130.82 yen. It also gained 0.5
percent on the day to reach $1.3136, its strongest since late
Speculation was growing that the BOJ's ultra-loose policy
would drive Japanese investors to riskier and higher-yielding
foreign assets, with the euro one of the beneficiaries.
So far, there was little evidence of that happening,
however. Data from Japan's Ministry of Finance showed Japanese
investors sold a net 1.145 trillion yen ($11.5 billion) worth of
foreign bonds last week, the highest sales in a year.
"The euro should stay strong. Peripheral bond yields are
falling, bank shares are up and peripheral equity markets are
leading the rebound in EMU shares," Morgan Stanley analysts said
in a note to clients.
"We maintain our bullish euro/dollar position with important
pivotal points at $1.3135/1.3150 now set to be tested. A move
above here would open the way for a rebound towards $1.33/1.34."
The yen suffered particularly against higher-yielding
currencies like the Australian and New Zealand dollars.
The Australian dollar rose to a five-and-a-half year high of
105.39 yen while the New Zealand dollar hit 86.43 yen
, its strongest since early 2008.