FOREX-Yen at post-intervention low, euro/dollar steady

* Yen at post-intervention lows, euro/yen at 10-mo high

* Japan repatriation expectations seen overstated

* Fed seen lagging ECB in rate hike
(Updates prices, adds quotes)

By Julie Haviv

NEW YORK, March 29 (Reuters) – The yen slid to
post-intervention lows on Tuesday and analysts anticipate more
losses if the spread between U.S. and Japanese yields continues
to widen and if repatriation flows into Japan fail to emerge.

The two-year U.S. Treasury yield rose to 0.81 percent, eight
basis points above Friday’s close and up 18 basis points in six
days, widening its gap over comparable Japanese yields.

The wider spread helped the dollar reached its highest
levels against the yen since March 18, when the Bank of Japan
and other major central banks intervened to stop runaway yen
gains.

“While there are no obvious catalysts for the yen’s moves,
we suspect that the combination of recent equity market
resilience and higher U.S. Treasury yields is weighing on the
Japanese currency,” said Vassili Serebriakov, currency
strategist at Wells Fargo Bank in New York.

The dollar rose to 82.48 yen (JPY=: Quote, Profile, Research) while the euro was last
at 116.08 yen (EURJPY=: Quote, Profile, Research), a 10-month high.

“There are a lot of yen negatives right now,” said Steven
Englander, head of G10 strategy at CitiFX in New York.

“First, the rate differential between U.S. and Japanese
yields has widened, working in the dollar’s favor,” he said.
“Second, it is becoming increasingly clear that repatriation
flows (to Japan) are not panning out and if anything will be
limited.”

The yen hit a record high against the dollar during the
week following Japan’s massive earthquake and tsunami, largely
due to expectations investors would repatriate funds from
overseas back into Japan.

CitiFX said there are several reasons why repatriation
flows should be limited, one of which is that Japanese
households are still accumulating foreign assets.

Japanese firms also appear to have enough funds to deal
with the costs of rebuilding.

“Life insurance companies can cope with payments because of
their cash holdings. Casualty insurance companies may encounter
some difficulty but government reinsurance should cover the
payments,” the firm said in a research note.

Also, pension funds and retail investors need not raise yen
cash and repatriate.

“Japanese banks will meet huge loan demand in the area,
whereas the government is to increase JGB issuance. The BOJ
(Bank of Japan) will be obliged to embark upon further monetary
easing,” the firm said.

CitiFX said this policy mix could be negative for the yen
in the medium and long run.

FED SEEN LAGGING ECB

The dollar rose against the euro early on Tuesday after
St. Louis Federal Reserve bank President James Bullard told an
audience in Prague the U.S. economy was strong enough to
curtail the Fed’s $600 billion bond-buying program by $100
billion [ID:nLDE72S0RJ].

The program, aimed at keeping interest rates low to bolster
the economy, has been widely deemed a bane for the dollar on
views it is tantamount to printing money.

But the dollar’s gains versus the single currency were
short lived, as many expect the European Central Bank to
tighten policy well before the Fed.

The euro (EUR=: Quote, Profile, Research) hit a session low of $1.4060 on the EBS
trading platform after falling through reported bids at
$1.4080. It last traded nearly unchanged at $1.4084.

The euro has retreated from a 4 1/2-month high of $1.4249
hit last week, but has been supported on the view the ECB may
raise interest rates at its next policy meeting on April 7.

The $1.40 level is supported by a trendline drawn from the
low below $1.30 hit in January, while the euro’s 21-day moving
average stands just above that level, at around $1.4006.

On the upside, heavy options-related barriers around
$1.4250 were expected to cap gains. A break of that level may
see a test of the November high of $1.4283.
(Additional reporting by Jessica Mortimer in London; Editing
by Andrea Ricci)

FOREX-Yen at post-intervention low, euro/dollar steady