The yen dipped on Thursday, edging closer to a four-month low on Japanese importers' selling the currency and as the market viewed the Bank of Japan's latest easing steps more positively. Other major currencies were mostly steady as investors looked to crucial events in the United States in coming days, including Friday's jobs report and elections on Tuesday.
The dollar rose to as high as 80.13 yen, fully recovering the lost ground on disappointment after the BoJ's easing on Tuesday, and inching towards the four-month high of 80.38 hit last Friday. It last stood at 80.07 yen, up 0.4 percent on the day.
"Those who just trade on news headlines sold dollar/yen after the BOJ. But the BoJ's latest stance is quite aggressive as it plans to keep easy policy until deflation ends, thus likely to keep the dollar supported," said Minori Uchida, chief FX strategist at the Bank of Tokyo-Mitsubishi UFJ.
On Tuesday, the BoJ increased its asset purchase programme by 11 trillion yen, a move that was roughly in line with market expectations, though some traders were betting on a bigger move, partly as the BoJ's policy meeting lasted longer than usual. The catalyst for the dollar's gain on Thursday was large bids from a Japanese importer. Analysts noted that corporate currency flows tend to favour the dollar these days because of Japan's trade deficit - a sea change from just a few years ago when exporters' yen buying dwarfed importers' yen selling.
Nonetheless, there are dollar offers from Japanese exporters above the four-month high, suggesting the dollar's further advance would likely depend on a strong job growth figure in the United States from the payrolls data, traders also said. Another potential boost for the dollar would be the outcome of the US presidential election. There is a rough consensus in financial markets that a victory by Republican candidate Mitt Romney would lift US bonds yields and dollar/yen, which often tracks US bond yields.
The euro bought $1.2966, little changed from its New York close, having again found the going tough above $1.3000. It remained well within a $1.2800-1.3200 range seen since early September. Ongoing uncertainty about if and when Spain will seek a bailout and trigger the European Central Bank's bond-buying programme, and whether Greece will secure more emergency loans, continued to dog the single currency.
The Australian dollar hardly budged as Chinese manufacturing data pointed to a tentative recovery but lacked the punch to dispel concerns about further slowdown. The Aussie stood flat at $1.0365, near the top of its $1.02-1.04 range of the past few weeks.