SYDNEY The yen plumbed fresh multi-year lows against its G3 peers on Friday, having posted its biggest monthly decline in 12 years versus the euro as the market positioned for more aggressive easing from the Bank of Japan.
Investors are now awaiting the latest report on China's manufacturing sector due around 0100 GMT, where any upside surprise could bolster risk appetite and put the yen under even more pressure.
The dollar bought 91.75 yen, having risen as high as 91.82, a level not seen since June 2010. The euro touched 124.65, bringing in view the April 2010 peaks near 128.00.
In January alone, the single currency surged nearly 9 percent on the yen, while the dollar was up more than 5 percent.
Selling the yen has become an easy one-way bet with newly elected Prime Minister Shinzo Abe heaping relentless pressure on the BOJ to jolt the economy out of a decade long malaise.
Responding to intense political pressure, the BOJ this month doubled its inflation target to 2 percent and switched to an open-ended commitment to buying assets next year.
On Thursday, a BOJ deputy governor flagged the strongest signal yet that it will boldly implement more stimulus if needed to achieve the bank's new inflation target.
As a result, analysts expect further weakness in the yen with some expecting the dollar to rise to 100 yen in time.
"We expect sustained weakness in the yen because of Prime Minister Shinzo Abe's aggressive policy changes," Michael Sneyd, analyst at BNP Paribas wrote in a client note. He sees the dollar reaching 95 yen in the first quarter of this year.
In contrast, diminishing worries about Europe's debt crisis and the European Central Bank's relatively more upbeat outlook for the region have made the euro more attractive against the yen and dollar.
That saw the euro climb some 3 percent against the greenback in January, reaching 14-month highs. It was last at $1.3583, having touched $1.3594.
The single currency's strength has pushed the dollar index to a one-month low of 79.133 .DXY, leaving it dangling precariously above the December low of 79.008. A break there could see the market target the September trough of 78.601.
Traders said month-end selling of the dollar had been a dominant driver in the latest move, but all eyes are now on the non-farm payrolls (NFP) report. Forecasts centered on a rise of 160,000 jobs and the unemployment rate to remain steady at 7.8 percent.
David Song, currency analyst at DailyFX, said an upbeat NFP reading could add to the case for the Federal Reserve to slowly move away from its easing cycle.
"We may see a growing number of Fed officials scale back their willingness to preserve the highly accommodative policy stance for a 'considerable time' as the world's largest economy gets on a more sustainable path," he said.
Commodity currencies made somewhat of a tentative comeback against a shaken greenback. The Aussie dollar bounced to $1.0433 from a one-month low of $1.0380.
(Editing by Wayne Cole)