The dollar hovered near a four-year high against the yen on Thursday after the minutes of the US Federal Reserve's March meeting raised expectations it will scale back its bond-buying spree by the end of the year. Such a possibility contrasts with the stance of the Bank of Japan Governor Haruhiko Kuroda, who signalled his readiness on Wednesday to offer further stimulus or maintain an ultra-easy policy beyond two years if meeting the bank's 2-percent inflation target proves difficult.
"The Fed is likely to reduce its bond buying at some stage. Clearly it's unlikely to keep buying bonds for two years," said Minori Uchida, chief currency analyst at the Bank of Tokyo-Mitsubishi UFJ. The dollar rose as high as 99.88 yen late on Wednesday, having gained more than 7 percent on the yen since the BOJ last week unveiled a radical stimulus programme that even eclipsed the Federal Reserve's own massive plan.
There were hefty offers at a big round number of 100 yen, from option players and Japanese exporters, prompting the currency to ease off to 99.60 yen, down 0.2 percent from late US levels. In addition, data from Japan's Ministry of Finance showed Japanese investors sold a net 1.145 trillion yen ($11.5 billion) worth of foreign bonds last week, the biggest selling in a year, despite talk that they would buy foreign bonds after the BoJ's easing.
Still, many market players think the dollar is set to rise above 100 yen, which would take the greenback to highs not seen since mid-April 2009. A break there would pave the way for a test of the April 2009 peak of 101.45. "There is quite a lot of profit-taking after a sharp rally. But the dollar didn't fall much, which seems to me a hallmark of the strength of this market," said a trader at a European bank.
The Fed's minutes, which were inadvertently released hours ahead of schedule, showed a few Fed policymakers expected to taper the pace of asset purchases by mid-year and end them later this year, while several others expected to slow the pace a bit later and halt the quantitative easing programme by year-end.
The minutes helped the euro retreat from its one-month high versus the dollar. The common currency slipped to $1.3054, down 0.1 percent from late US levels and off Wednesday's one-month high of $1.3122 The euro fetched 129.77 yen, after having touched a fresh three-year high of 130.57 the previous day. Elsewhere, the Australian dollar slipped 0.2 percent after Australia's jobless rate rose unexpectedly to its highest in more than three years in March. The Aussie stood at $1.0520, off a 2 1/2-month high of $1.0553. But the New Zealand dollar climbed to a 20-month high of $0.8601, on the back of positive risk sentiment as Wall Street shares rallied to new highs.
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