Dollar slips versus yen but two-year high still in sight

The dollar eased against the yen on Wednesday but stayed in sight of a two-year high as investors awaited US data due later in the session for a possible cue to break through resistance at 120 yen.
Expectations that US interest rates will keep rising in the near term continued to underpin the dollar, but market players turned cautious about pushing the dollar up before the European Central Bank's policy decision on Thursday.
The ECB is widely expected to bump up its key rate - the first increase in five years - to 2.25 percent from the current 2 percent, but after that the central bank would not likely raise again anytime soon, traders said.
The Federal Reserve, meanwhile, is expected to tighten rates by 25 basis points next month and also in January, pushing the fed funds rate up to 4.5 percent.
The dollar had rebounded on Tuesday as readings for US durable goods orders and new home sales in October and consumer confidence in November all came in stronger than expected, fuelling expectations that rates will keep climbing.
"Yesterday's solid data removed a question mark from expectations for higher US interest rates, though it's nothing more than that," said Daisuke Uno, market strategist at Sumitomo Mitsui Banking Corp.
The yield advantage has helped the dollar soar to a 27-month high just below 120 yen and a two-year peak of $1.1640 per euro this month.
The dollar was at the lower end of the day's range at 119.35 yen after climbing as high as around 119.80 yen in early Asian trade. It rose 0.7 percent to around 119.70 yen on Tuesday.
The euro was little changed at $1.1785 after slipping 0.5 percent the previous day.
Analysts said the dollar could pierce the key 120 yen level later in the day if revised third-quarter growth data and a key US index of manufacturing activity in November provide further evidence of economic strength.
The market was also awaiting the Fed's Beige Book of regional economic conditions to compare the tone with the minutes from the central bank's previous policy meeting.
Traders said 120 yen would be hard to clear, however, given a large amount of option-related orders lined up around that level.