* Major currencies in holding pattern
* Christmas holiday keeps markets subdued
* Dollar off multi-year highs vs yen
By Anirban Nag
LONDON, Dec 23 The dollar eased on Monday,
tracking a drop in long-dated Treasury yields, though with the
Federal Reserve starting to withdraw some of its extraordinarily
large monetary stimulus, losses are likely to be limited.
Major currencies were in a holiday pattern amid thin
liquidity due to a holiday in Japan, while for most of Europe it
was the last full trading session before the Christmas holidays.
That left investors and speculators to square positions before
The dollar bought 103.98 yen, trading in a narrow
103.92/104.08 range after easing back from a five-year peak of
104.64 hit on Friday. Volumes in the pair were 90 percent below
their one-month average, according to Reuters Matching data.
The euro was flat at $1.3680, having climbed off a
two-week trough of $1.3625 on Friday. Against the yen, the
common currency stalled at 142.20, off a five-year
high of 142.90.
"While the potential for speculative dollar/yen profit
taking remains substantial given yet another new high, the
underlying trend of yen weakness should persist into the new
year," said Adam Myers, European head of FX strategy at Credit
"Our expectations for dollar buying in early 2014,
complementing yen selling pressure should resume see dollar/yen
move higher towards our 106 yen end-March forecast."
Part of the reason why the dollar will be sought-after is
because short-dated Treasury yields are still moving
higher, driven by expectations that the Federal Reserve would
continue to trim its bond-buying programme in coming months.
And while long-dated Treasury yields fell
on Monday, if forthcoming data out of the United
States continued to outperform, rate differentials are likely to
move in favour of the dollar, analysts said.
Data on Friday supported the Fed's decision with revised
figures showing the world's biggest economy grew at its fastest
pace in almost two years in the third quarter.
BNP Paribas analysts said U.S. data needed to meet a certain
threshold of strength in order to maintain the dollar's upward
"With the Fed having begun the tapering process now, the
burden of proof has shifted somewhat - data now has to be just
strong enough to keep tapering on track, as opposed to the
presumably stronger track record needed to justify a start to
the tapering process," they wrote in a note to clients.
U.S. data due for release this week include personal income
and spending on Monday and durable goods on Tuesday.