* Dollar/yen hits highest level since July 2010
* Euro touches 3-week low vs dollar after Fed minutes
* Euro/yen poised to close below 200-week moving average
By Masayuki Kitano and Lisa Twaronite
SINGAPORE/TOKYO, Jan 4 The dollar rose to its
highest level against the yen in nearly 2-1/2 years on Friday,
while the euro also firmed against the yen on expectations that
this year will bring more monetary stimulus by the Bank of
The euro hit a three-week low against the greenback after
minutes from the U.S. Federal Reserve's last meeting indicated
that while the Fed looks set to continue buying bonds, some
policymakers are reticent about further increasing its $2.9
trillion balance sheet.
The dollar added 0.6 percent to 87.75 yen after
earlier rising as high as 87.835 yen on trading platform EBS,
its strongest level against the yen since July 2010.
Tokyo markets reopened on Friday for the first day of
trading after the long Japanese New Year's holiday, with the
dollar having gained 12.8 percent against the yen in 2012 in its
biggest yearly percentage rise since 2005. Investors are betting
that the new government of Prime Minister Shinzo Abe will push
to weaken Japan's currency and implement aggressive stimulus,
and lean on the Bank of Japan to do the same.
"The yen's negatives are increasingly prominent," Steven
Englander, head of global G10 currency strategy for Citigroup,
said in a research note, adding that growing pressure on the BOJ
was among the factors bearish for the yen.
Moreover, he said, the run-up in U.S. equities has pulled
the yield spread between benchmark 10-year U.S. Treasuries and
10-year Japanese government bonds to their widest since early
April, which also lends support to the dollar over the yen.
A trader for a Japanese bank in Singapore said the dollar
was supported against the yen due to persistent buying interest
from non-Japanese players. "People outside Japan are all looking
to buy (the dollar) on dips," he said.
U.S. JOBS DATA
The latest Fed minutes showed that Fed policymakers are
increasingly concerned about the potential risks of the Fed's
"Several (officials) thought that it would probably be
appropriate to slow or to stop purchases well before the end of
2013, citing concerns about financial stability or the size of
the balance sheet," the minutes said.
Rob Ryan, strategist for RBS in Singapore, said that the
minutes raise the chances that on the back of more good data, a
few other Fed policymakers "might shift in that direction and
possibly bring QE (quantitative easing) to an end well before
people thought was likely."
"If we do get some decent jobs data tonight, then the impact
of that jobs data is going to be magnified," Ryan added.
Later on Friday, the U.S. nonfarm payrolls report is
expected to show the American economy added 150,000 jobs in
December, according to a Reuters survey of economists, up from
November's 146,000. The U.S. unemployment rate is expected to
stay at 7.7 percent.
The euro held steady at $1.3045. Earlier, the euro
fell to $1.3019, its lowest since Dec. 12.
A trader for a Japanese brokerage house in Tokyo said the
euro's decline against the dollar over the past couple of
trading sessions was partly a reflection of market positioning.
"Since late last year, the market's positions were tilted
toward being long the euro, with the euro having been bought on
the crosses," the trader said, adding that the Fed minutes on
Thursday created an opportunity to sell the single currency.
The euro gained on the yen, rising 0.6 percent to 114.47 yen
, but was still far below an 18-month high of 115.995
yen set on trading platform EBS on Wednesday.
Against the yen, the euro is on track to end the week below
its 200-week moving average, now near 114.96, which could signal
a pullback toward its March 2012 high of 111.43 yen.