Reuters: US Dollar Report: FOREX-Yen hits 3-month low vs dollar on BOJ easing optimism

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FOREX-Yen hits 3-month low vs dollar on BOJ easing optimism Oct 23rd 2012, 01:41 Mon Oct 22, 2012 9:41pm EDT * Yen extends recent losses on expectations for BOJ easing * Dollar/yen hits 3-mth high, euro/yen sets 5-mth peak * Sources say BOJ leaning toward easing policy next week * Dollar/yen may head toward 82 yen by year-end -trader By Masayuki Kitano SINGAPORE, Oct 23 (Reuters) - The yen hit a three-month low against the dollar and a five-month trough versus the euro on Tuesday, pressured by growing expectations for the Bank of Japan to ease monetary policy further at a policy meeting next week. Earlier, the dollar rose to as high as 80.02 yen on trading platform EBS, its highest level since early July. The dollar later trimmed its gains and last stood at 79.87 yen, down 0.1 percent from late U.S. trade on Monday. Sources familiar with the Bank of Japan's thinking said the central bank is leaning toward easing monetary policy again next week, with policymakers discussing additional steps that could come together with a further increase in its asset buying scheme. The BOJ has been under renewed pressure to expand monetary stimulus at its Oct. 30 rate review when it is expected to cut its growth forecasts and push back the timing of hitting its 1 percent inflation target. While the dollar could face some profit-taking and Japanese exporter offers at levels above 80.00 yen, it will probably find support at levels near 79.50 yen in the near term, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo. "Yen-selling versus the dollar will probably continue ahead of the BOJ (meeting) and while the dollar might see a slight pullback afterwards, I think this trend will persist," Maeba said, adding that the dollar may rise toward 82 yen by year-end. The balance of flows in the foreign exchange market now seem supportive of the dollar against the yen, given that Japan's trade balance has been in a deficit, and also due to the potential for yen-selling flows related to Japanese firms' overseas investment, Maeba added. The dollar's rise versus the yen, however, may lose momentum if the BOJ were to hold off from additional monetary easing, he said, adding that the dollar may drop back to the 79.00 yen to 79.50 yen area in that case and may face a steeper fall from there. The euro touched its highest level in more than 5 months at 104.59 yen earlier on Tuesday. The euro last stood at 104.31 yen, down 0.1 percent from late U.S. trade on Monday. Against the dollar, the euro held steady from late U.S. trade on Monday at $1.3058, staying below a one-month high of $1.3140 set last week. Expectations that Spain will apply for a bailout, prompting the European Central Bank to start buying its bonds, have helped support the euro in recent weeks, although uncertainty over the timing of such a move has helped to limit its gains. Link this Share this Digg this Email Reprints

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