FOREX-Yen pressured, may fall more on strong U.S. jobs

* Yen hits 10-mth low vs euro, 6-wk trough vs dollar

* Dlr/yen rises above 200-day MA, may target Y84.50

* Widening yield differentials driving yen lower-traders

(Recasts, adds quote, changes dateline from SYDNEY/SINGAPORE)

By Anirban Nag

LONDON, April 1 (Reuters) – The yen fell on Friday to near a
10-month low against the euro and below its 200-day moving
average versus the dollar on expectations for a strong U.S. jobs
report, which could put further pressure on the currency.

Speculation was growing that non-farm payrolls data, due
later on Friday, would be strong, reinforcing perceptions that
U.S. economic recovery is on track and widening the yield
differentials between dollar and yen assets further.

That would enhance the yen’s appeal as a funding currency of
choice amongst investors like hedge funds and model funds who
are increasingly looking to sell the yen and buy high-yielding
currencies.

Analysts are forecasting that the U.S. economy will add
190,000 jobs in March. The data comes a day after hawkish
comments from a U.S. Federal Reserve official gave traders more
reason to think the Fed will raise interest rates before the
Bank of Japan.

The BOJ will probably lag behind the Fed and the European
Central Bank in raising interest rates, especially in the wake
of the March 11 earthquake and tsunami that devastated Japan’s
northeast.

“A strong payrolls number would be reflected in the
dollar/yen and it could rise to 84.50 in the short term,” said
Simon Derrick, head of currency research at Bank of New York
Mellon. “We expect to see prolonged yen weakness due to loose
monetary and fiscal policy in Japan.”

The dollar was up 0.5 percent at 83.65 yen (JPY=: Quote, Profile, Research). It
touched a six-week high of 83.748 yen on trading platform EBS
earlier, and the next major peak on daily charts is its
mid-February peak of 83.98 yen.

The dollar rose above its 200-day moving average against the
yen at 83.60 yen for the first time since June, a sign that the
yen’s uptrend may be coming to an end.

The dollar had tumbled to a post-World War Two record low of
76.25 yen in March, as the yen surged on the back of market
speculation that Japanese investors may repatriate funds from
abroad after the earthquake.

There has been little sign that such repatriation has taken
place, and the yen later fell back after the Group of Seven
industrialised nations intervened jointly to sell the yen on
March 18. Japan conducted a total of 692.5 billion yen ($8.4
billion) in FX intervention in March, the Ministry of Finance
said on Thursday.

YEN’S BROAD FALL

Analysts said improving risk appetite was drawing more
investors towards yen-funded carry trades. The yen fell broadly
on the crosses, hitting an 11-month low against the Australian
dollar and its lowest in more than 10 months against the euro.

“In this risk-on environment, there is a growing contrast in
monetary policies among the G3, and that situation is likely
leading to some yen carry trades,” said Koji Fukaya, director of
global foreign exchange research at Credit Suisse Securities in
Tokyo.

The single European currency rose as high as 118.675 yen
(EURJPY=R: Quote, Profile, Research) on trading platform EBS, the euro’s highest against
the yen since mid-May 2010. The euro last stood at 118.35 yen,
up 0.6 percent on the day.

The euro was flat against the dollar (EUR=: Quote, Profile, Research) at $1.4167 with
an extraordinary issue of 2012 bonds by Portugal in focus. The
issue is set to test investor appetite for the struggling euro
zone state’s debt after its president on Thursday called a snap
election for early June. [ID:nLDE7300CZ]

Talk of sovereign demand at $1.4140-50 and at $1.4125-30 is
likely to put a base under the single currency.

The dollar was helped after the Wall Street Journal reported
that Minneapolis Federal Reserve President Narayana Kocherlakota
signaled the Fed could raise interest rates by three quarters of
a percentage point by the end of the year. [ID:nN31167243]

A recent series of hawkish comments by Fed officials have
helped drive U.S. Treasury yields higher this week and caused
the dollar’s yield advantage over the yen to widen.

The commodity-linked Aussie was up 0.1 percent at $1.0338,
hovering near a 29-year high of $1.0373 (AUD=D4: Quote, Profile, Research) hit on
Thursday.
(Editing by Susan Fenton)

FOREX-Yen pressured, may fall more on strong U.S. jobs