TOKYO: The dollar moved towards five-year highs against the yen in Asia Friday as investors bet that the US Federal Reserve will announce a start to its long-awaited stimulus pull back when it meets next week.
The greenback bought 103.56 yen in Tokyo morning trade, approaching levels not seen since late 2008 and well up from 102.40 yen in New York on Thursday.
The euro was nearly flat against the dollar, fetching $1.3748 from $1.3752 while the single currency gained to 142.36 yen from 141.19 yen -- also closing in on a five-year high.
Speculation over the Fed stimulus was fuelled Thursday after data showed US retail sales rose a better-than-expected 0.7 percent in November, a key month that kicks off the important year-end holiday shopping season.
Although some analysts say the Fed may hold off until January, the upbeat sales figures added to the picture of a stronger US economy, raising the chances that the central bank would start tapering its $85 billion-a-month bond buying programme.
"The conclusion must be that it is increasingly likely the much debated Fed taper begins next week," National Australia Bank said.
The Fed holds its final policy meeting of the year on Tuesday and Wednesday.
Expectations of further easing measures from the Bank of Japan -- after a marked slowdown in the country's third-quarter growth -- have also weighed on the yen.
Dealers said a closely watched BoJ business confidence survey due out Monday will give a better idea of the bank's plans for its stimulus scheme, which it unveiled in April.
"Investors will be looking for a cue to sell the yen stemming from the BoJ's additional easing," Citigroup Global Market Japan chief forex strategist Osamu Takashima told Dow Jones Newswires.
The euro has enjoyed strong support since the ECB this month held off any new interest rate cuts despite prolonged low inflation. That followed its surprise cut in November of its central refinancing rate by a quarter-point to counter the threat of deflation.
But Credit Agricole said the euro-dollar rate could be set for a tumble, with the ECB likely to usher in more policy measures next year to prop up a weak economy.
"There is only very limited upside left to the euro-dollar," it added.
"Given the risk for the ECB to turn more dovish again and as the Fed is getting closer to a reduction of (stimulus) we see room for renewed euro-dollar downside."
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