* Option-related bids keep yen's slide in check
* Expectations of more easing keep pressure on yen
* Euro still favoured among G3, but ECB event-risk looms
* RBA, BOE also in focus this week
By Hideyuki Sano and Ian Chua
TOKYO/SYDNEY, Feb 4 The listless yen bounced
back a tad from a 2 1/2-year low against the dollar on Monday as
option-related buying prompted short-term players to give up a
further test of the yen downside for now.
But it still faced the nagging problem of being the currency
of choice to sell, with the Bank of Japan seen under the most
pressure among major central banks to ease policy aggressively.
" Now that Japanese policymakers set a two-percent inflation
target, they can't stop monetary easing even if the yen falls to
around 100 yen per dollar because inflation will be nowhere near
two percent in the near future," said Mitsuru Saito, chief
economist at Tokai Tokyo Securities.
The dollar bought 92.65 yen, down 0.2 percent from
late U.S. trade on Friday. But it was not far from a 2-1/2 year
high of 92.97 on Friday.
An attempt early on Monday to test 93 yen was hampered by
dollar selling to hedge option barriers. Still, many traders see
it on track to retest 95.00, a level at which it was capped in
The euro also extended its rally to 126.97 on
Friday, nearing its 2010 peak of 127.46. It was last at 126.19
yen, 0.3 percent below late U.S. trade.
Only five weeks into the year and the common currency is
already up around 10 percent against the yen. The dollar is
nearly 7 percent higher, following a rise of about 13 percent
"The Japanese authorities have committed themselves to a 2
percent inflation target, but the market perceptions about
economic growth and inflation expectations remain subdued,"
analysts at Barclays Capital wrote in a note.
"We therefore believe that the authorities will continue to
use the JPY as a tool to boost actual inflation, thus helping to
validate the new 2 percent target."
Data last Friday showed currency speculators added bearish
bets on the yen, while trimming bets against the greenback.
Among the G3 currencies, the euro has been the standout
performer, having notched up gains of 3.5 percent on the
greenback so far in 2013 as well.
It was last at $1.3627 down slightly from late U.S.
levels after climbing as high as $1.3710 on Friday, a level not
seen since late 2011.
Data last Friday showing euro zone factories had their best
month in nearly a year during January underscored optimism for
U.S. jobs data was mixed with employment growing modestly in
January. Encouragingly, job gains in the previous two months
were larger than first reported.
Part of the reason for the euro's outperformance is the
European Central Bank's relatively upbeat view on the euro zone
economy. Yet the strength of the currency is sure to sit
uncomfortably with the ECB, which will be able to make a clear
statement on the currency at Thursday's meeting.
Still, any attempts by ECB President Mario Draghi to talk
down the euro will likely only have a temporary effect, analysts
The Bank of England also meets Thursday and should maintain a
dovish tone. This will give no reprieve to sterling, which has
slumped to 15-month lows on the euro. The common currency bought
86.91 pence, having risen as high as 87.16 pence.
Against the dollar, the British unit is also dangling just
above five-month low hit a week ago of $1.5674, trading at
Commodity currencies have somewhat faded into the
background, although the New Zealand dollar has been quietly
grinding higher thanks to recent hawkish-sounding comments from
the Reserve Bank of New Zealand.
The kiwi drifted up to a 16-month high on the greenback at
$0.8493 and hit a 2-1/2 year peak on the Australian
dollar, which slid to NZ$1.2274.
The Aussie is set to remain on the back foot with the Reserve
Bank of Australia (RBA) likely to keep the door open to more
rate cuts this week.
While the RBA is not expected to ease at its first meeting of
the year on Tuesday, analysts expect it will eventually be
forced to do so later in the year, given the number of economic
sectors struggling with the strong currency.