FOREX-Dollar hits 4-month high vs yen as BOJ easing eyed

Masayuki Kitano

* Yen sags ahead of BOJ policy meeting next week

* Dollar/yen hits highest level since late June

* RBNZ less dovish than expected, NZ dollar up

* Fed sticks to stimulus plan, no new steps

SINGAPORE, Oct 25 (Reuters) - The dollar hit a four-month high versus the yen on Thursday as expectations for more Bank of Japan monetary easing kept the yen under pressure.

The dollar rose to as high as 80.14 yen on trading platform EBS, its highest level since late June, and last stood at 80.09 yen, up 0.3 percent from late U.S. trade on Wednesday.

The greenback gained a lift versus the yen early on due to dollar buying by hedge funds, said a trader for a European bank in Tokyo.

``We have seen leveraged names buying dollar/yen all week,'' said Adam Gilmour, head of FX and derivative sales, Asia-Pacific, for Citigroup in Singapore.

``Japanese corporates are also expecting a higher dollar/yen and hence the offers in the market are drying up,'' he added.

The dollar has pushed higher against the yen this week, helped by growing expectations that the Bank of Japan will unveil further monetary stimulus at its policy meeting on Oct. 30 in a bid to help the export-focused economy through a global slowdown.

With expectations for BOJ easing already running high, the yen is unlikely to fall sharply even if the BOJ were to embark on more monetary stimulus next week, said Roy Teo, FX strategist for ABN AMRO Bank in Singapore.

``I think quite a bit has been priced in now, in terms of weakness in the yen,'' Teo said, adding that ABN AMRO's forecast was for the dollar to trade near 80 yen, roughly where it is now, at the end of the year.

Still, the dollar's downside is likely to be limited since U.S.-Japan yield spreads have moved in the dollar's favour recently, Teo added.

A series of upbeat U.S. economic indicators this month including data pointing to a strengthening recovery in the housing market, have helped lift U.S. Treasury yields and caused U.S.-Japan yield spreads to widen.

Later on Thursday, there will be more U.S. indicators for the market to digest, including data on initial jobless claims and durable goods orders.

The U.S. Federal Reserve on Wednesday stuck to its plan to keep stimulating U.S. growth until the job market improves even as it acknowledged some parts of the economy were looking a bit better. The outcome was in line with market expectations and contained no surprises.

Meantime, the euro rose 0.3 percent to $1.3007.

The single currency has lost steam since hitting $1.3140 on Oct. 17 as markets grew impatient waiting for Spain to request a bailout and activate the European Central Bank's bond-buying programme.

But investors were also wary of becoming too bearish on the euro, given that Madrid could trigger the programme any time.


Elsewhere in the currency market, the kiwi dollar was boosted by less-dovish-than-expected comments from the New Zealand central bank.

Investors warmed to the New Zealand dollar after new central bank governor, Graeme Wheeler, kept rates unchanged and reiterated expectations for inflation to head back towards the middle of its 1-3 percent target range.

Some had been wagering that low inflation would lead the bank to open the door for a possible easing.

``The doves are left empty-handed as the brief communique was surprisingly balanced,'' said Annette Beacher, head of Asia-Pacific Research at TDSecurities.

The kiwi dollar rose 0.5 percent to $0.8234, pulling well away from a six-week low of $0.8100 plumbed earlier in the week.