Reuters: US Dollar Report: FOREX-Yen seen vulnerable to BoJ easing expectations

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FOREX-Yen seen vulnerable to BoJ easing expectations Oct 23rd 2012, 08:35 Tue Oct 23, 2012 4:35am EDT * Dollar trades above 80 yen for first time since July * Strategists say market bets on easing may be overdone * Euro steady, focus switching to euro zone growth outlook By Nia Williams LONDON, Oct 23 (Reuters) - The yen regained some ground after hitting a three-month low against the dollar and five-month low against the euro on Tuesday, but looked vulnerable to expectations of more monetary easing from the Bank of Japan. The euro also dipped against the dollar, although held firmly within the recent $1.28 to $1.3170 range it has traded in since mid-September. Bank of Japan officials are leaning towards easing monetary policy again at the Oct. 30 policy meeting, according to sources familiar with its thinking. More easing would be likely to weigh on the yen, and help Japan's export-reliant economy cope with lacklustre global growth. Some strategists said weakness in the yen may be overdone however, and the currency could rebound strongly if Japanese officials disappoint the market by easing less than expected. "The market is a bit fixated on this meeting next Tuesday and no one wants to stand in front of a freight train," said Steven Saywell, head of FX strategy at BNP Paribas. "There's potential for disappointment we are looking for opportunities to sell rather than chase the dollar higher." The dollar hit a three-month high of 80.02 yen on trading platform EBS, its highest level since early July, before retreating to trade down 0.2 percent on the day at 79.81 yen. While the dollar could face some offers from Japanese exporters 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. The euro fell 0.4 percent to 103.96 yen, retreating from a five-month high of 104.59 yen hit during the Asian trading session. EURO RANGE-TRADING Against the dollar, the euro dipped 0.2 percent to $1.3027, with market players reporting some buying around $1.3020-30. Speculation Spain will ask for financial aid, enabling the European Central Bank to buy its bonds, has helped support the euro in recent weeks. Uncertainty about when such a request might come has made many investors wary of chasing the single currency higher, however. There was little reaction in currency markets to news ratings agency Moody's had downgraded five Spanish regions. Some strategists said the euro zone's growth outlook was becoming a more important driver of the euro than speculation over when Spain may seek a bailout. Initial readings of euro zone PMI data and a German Ifo business sentiment survey on Wednesday will be closely watched for any indication growth in the currency bloc is picking up. "Tomorrow is a big day in terms of flash PMIs out of Europe that will shape growth expectations. Positive surprises could break the range to the upside," said George Saravelos, FX strategist at Deutsche Bank. Saravelos said potential for improving euro zone growth and the U.S. Federal Reserve's open-ended monetary easing policy meant the euro could rally to $1.35 by the end of 2012. The U.S. dollar rallied against the Canadian dollar on expectations the Bank of Canada will make no mention of eventual rate hikes in a statement following its policy meeting on Tuesday. The U.S. currency rose 0.3 percent to C$0.9948, clsoe to a 2-1/2 month high of C$0.9964 hit the previous day. (Reporting by Nia Williams/editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441) Link this Share this Digg this Email Reprints

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