SYDNEY The yen remained in the doldrums on Friday as investors continued to give it a wide berth on expectations the Bank of Japan would print more money next week to stimulate the world's third biggest economy.
The dollar bought 83.63 yen, having risen as high as 83.675, a level not seen since March. The euro fetched 109.34 yen, not far off an eight-month high of 109.55. The single currency was on track to end the week more than 2 percent higher on the yen.
"We forecast more yen weakness in 2013... eventually, the yen must weaken because the economy needs help so badly, but we have seen many years of policy timidity and frequent policy disappointments," said Kit Juckes, strategist at Societe Generale.
The BOJ releases its Tankan survey of businesses later Friday and a weak reading would only add to the case for aggressive action.
Juckes said if the BOJ did not bite the bullet this time, markets are likely to be pretty unforgiving, with both yen strength and equity weakness set to follow.
The dollar found a steadier footing against a basket of major currencies as the euro's rally ran out of steam. The dollar index .DXY was little changed at 79.924, having survived a fall to a one-week low of 79.711.
Traders said the Federal Reserve's move to replace its expiring 'Operation Twist' program with outright Treasury purchases this week had been widely expected. The news initially saw the dollar slip broadly.
However, frustration over the U.S. 'fiscal cliff' talks gave the greenback a bit of a safe-haven lift as negotiations to avert steep tax hikes and spending cuts between congressional Republicans and the White House hit a wall.
The euro was at $1.3078, having found the going tough above $1.3100. Even news that European governments have clinched a landmark deal on bank supervision and approved long-delayed aid to Greece failed to give the single currency fresh impetus.
The Australian dollar also recoiled to $1.0525, from a three-month peak of $1.0585 set earlier in the week. Still, it remained resilient amid hopes that growth will pick up in China, Australia's most valuable export market.
HSBC's early reading of China's December manufacturing activity due at 0145 GMT will be closely watched for signs the world's second biggest economy has rediscovered its mojo.
The Aussie has also enjoyed support from foreign central banks. Russia's First Deputy Chairman Alexei Ulyukayev was quoted as saying on Thursday the country's central bank has increased the share of the Australian dollar in its forex reserves to 1.5 percent.
(Editing by Wayne Cole)