* Euro firmer vs dollar, but not far from last week’s 4-month low
* Kiwi jumps after RBNZ raises interest rates, keeps hawkish bias
* Euro slips to near 13-month low vs New Zealand dollar (Updates prices, adds comments)
By Masayuki Kitano
TOKYO, June 12 (Reuters) - The euro hovered near a four-month low versus the dollar on Thursday, hobbled by a widening yield gap between euro zone bonds and their major peers, while the New Zealand dollar rose after the central bank retained its hawkish bias.
The euro last traded at $1.3544, up 0.1 percent on the day but not far from a four-month low of $1.3503 set last Thursday when the European Central Bank cut interest rates to record lows and took its deposit rate negative for the first time.
After that low was hit, short-covering had lifted the euro to a two-week high near $1.3678 on Friday. But the euro has faced renewed selling pressure this week, both against the dollar as well as higher-yielding currencies.
One key to the euro’s outlook is whether it will manage to breach support at levels around $1.3500, said Bart Wakabayashi, head of foreign exchange for State Street Global Markets in Tokyo.
“An important psychological level might be $1.3500. I think there will be some follow-through selling if that level is breached,” Wakabayashi said.
“If there is a clear break of $1.3480, then we will probably start to hear some chatter about $1.3200,” he said.
The euro had touched a low near $1.3477 in early February. A drop below that level would take the euro to its lowest level since last November.
According to Thomson Reuters data, the yield spread of two-year U.S. Treasury yields over two-year German government bond yields has risen to about 39 basis points this week, the fattest in seven years.
The common currency has also fallen on the crosses, as the ECB’s easing measures have stirred talk that the euro could increasingly be used as a funding currency for carry trades, in which investors sell low-yielding currencies to fund investment in higher-yielding assets.
Against the New Zealand dollar, the euro touched its lowest level in about 13 months of NZ$1.5644 on Thursday.
The kiwi rallied after New Zealand’s central bank raised interest rates by 25 basis points to a five-year high of 3.25 percent and cooled expectations it may slow the pace of future policy tightening.
Against the U.S. dollar, the New Zealand dollar jumped 1.1 percent to $0.8640.
The U.S. dollar held steady at 102.11 yen, not far from a one-week low of 101.86 yen set on Wednesday.
The dollar has retreated about 0.4 percent against the yen this week, struggling to gain traction even though U.S. bond yields have pushed higher.
“The main driver has been euro/yen,” said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore, adding that a selloff in the euro versus the yen has weighed on the dollar against the Japanese currency in recent trading sessions.
The euro edged up 0.1 percent to about 138.29 yen , up from Wednesday’s four-month low of 137.88 yen.
Analysts say the yen probably won’t react too much to the Bank of Japan’s two-day policy meeting that ends on Friday.
The BOJ is set to keep monetary policy steady in a policy decision due on Friday and may slightly revise up its assessment on overseas growth. That would signal confidence that Japan’s economy is on course to meet its inflation target next year without additional stimulus.
“There probably won’t be any hints about the possibility of additional easing,” said Shin Kadota, FX strategist for Barclays in Tokyo.
Reaction will probably be limited as market expectations about the possibility of the BOJ launching more monetary stimulus later this year have receded, Kadota added. (Additional reporting by Naomi Tajitsu in WELLINGTON; Editing by Eric Meijer and Richard Borsuk)