* Dollar/yen off highs, option barrier at 81.50 cited
* Dollar heads for best week vs yen since late June
* Euro under pressure as worries about Greece weigh
By Anooja Debnath
LONDON, Nov 16 A sell-off in the yen paused on
Friday but the Japanese currency remained on course for its
biggest weekly loss versus the dollar since late June on
expectations of aggressive monetary easing.
The dollar has strengthened more than 2 percent against the
yen over the past two sessions - its biggest two-day rally since
October 2011 - after Japanese Prime Minister Yoshihiko Noda
paved the way for a snap election on Dec. 16. The lower house of
parliament was dissolved on Friday.
Shinzo Abe, leader of the main opposition Liberal Democratic
Party and likely to be Japan's next leader, called on Thursday
for the country's central bank to adopt interest rates of zero
or below to spur lending.
The dollar was flat against the yen at 81.18 yen,
with traders citing a large options barrier at 81.50 yen and
stop-loss orders placed above it.
It hit a 6-1/2 month high of 81.46 yen on Thursday on
trading platform EBS and some said it could rise towards 82 yen
if the Bank of Japan, which holds a policy meeting next week,
indicated it could ease further.
Some analysts said while the dollar could continue to grind
higher, further sharp rises were less likely in the near term.
"We have had quite a big move in the last couple of days so
we've probably seen a bulk of the early moves. The direction
will continue trending higher in coming months," said Colin
Asher, senior economist at Mizuho Corporate Bank.
"Some investors with short-term horizons are probably
looking to take profits after such big moves and some of the
longer-term investors are happy to sit on their positions on the
expectations that the rise will continue."
Some strategists said the yen's current weakness may not
last if the BoJ disappoints next week by not laying the ground
for further easing.
The yen, which is seen as a safe haven in times of
uncertainty, could also gain if worries about the U.S. fiscal
cliff mount and euro zone debt concerns deepen.
"The basic driver is still the interest rate differential
between the dollar and yen, which is very narrow, and we have to
wait for what happens after the elections," said Marcus
Hettinger, global FX strategist at Credit Suisse in Zurich.
The dollar/yen pair traditionally has a strong correlation
with the spread between two-year U.S. Treasuries and Japanese
government bond yields.
Short-dated Japanese bond yields have fallen sharply this
week but so have U.S. Treasury yields on expectations of Federal
Reserve easing and safe-haven flows into Treasuries due to
worries about the U.S. 'fiscal cliff' of spending cuts and tax
rises scheduled for the turn of the year.
A dispute among Greece's international lenders and weak
economic data out of the euro zone has done little to lift
market sentiment towards the euro.
The euro was down 0.4 percent at 103.36 yen, but
on course for its biggest weekly gains since early October.
Against the dollar, the euro was down 0.3 percent at 1.2735
, though holding above Tuesday's two-month low of $1.2661.
Resistance is seen at its 200-day moving average of $1.2810.
A protracted impasse in U.S. talks to avoid some of the $600
billion of spending cuts and tax hikes that kick in in January
could prompt some investors seek shelter in the liquidity of the