Tuesday November 18, 2014 - 23:51:03 GMT
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Reuters - www.reuters.com
FOREX-Yen on defensive ahead of BOJ, euro holds gains
* Yen stays near lows against dollar & euro
* Market keen to see what BOJ has to say about weak economy
* Euro broadly higher after data-inspired rally
By Ian Chua
SYDNEY, Nov 19 (Reuters) - The yen hovered at multiyear lows against the dollar and euro early on Wednesday as the market cautiously waited to see what the Bank of Japan would say about the country's slide into recession.
The dollar fetched 116.84 yen, having climbed as far as 117.065 overnight, a high not seen since Oct. 2007. The euro scaled a six-year peak of 146.69 yen, before stepping back slightly to 146.53.
The Japanese currency has been on the backfoot after data on Monday showed the Japanese economy unexpectedly shrank for a second consecutive quarter, raising questions about the effectiveness of Prime Minister Shinzo Abe's policies.
Abe on Tuesday called an early election to seek a fresh mandate for his economic strategy and said he would postpone an unpopular sales tax rise. That should take the pressure off the BOJ to act again after last month's surprise easing.
The BOJ is widely expected to hold policy steady when its two-day meeting ends later in the day.
"While the central bank could sound more concerned about the growth outlook, additional measures are very unlikely today," analysts at BNP Paribas wrote in a note to clients.
"Markets will remain focused on fiscal measures, however, as the government prepares a package to address the GDP disappointment and prepare for December elections."
Later in the session, attention will turn to minutes of the Bank of England's last policy meeting. The Federal Reserve will also release minutes of its latest policy review.
The BoE minutes are likely to show that policymakers want to keep interest rates lower for longer. In contrast, some traders expect the Fed minutes to sound relatively more hawkish, highlighting the diverging policy pathways between the Fed and its peers.
Traders said that could give a lift to the dollar index, which dipped 0.4 percent on Tuesday as the euro staged a broad short-covering rally.
Investors had scrambled to cut bearish positions on the common currency after a survey showed German analyst and investor sentiment rose in November for the first time in almost a year.
The euro last stood at $1.2532, having popped up from $1.2442. It reached a one-week high against the Australian dollar at A$1.4414 and bounced to NZ$1.5817 from a two-month low of NZ$1.5673.
The Aussie was briefly unsettled late on Tuesday after Reserve Bank of Australia Governor Glenn Stevens again warned the market was underestimating the risk of a decline in the local currency.
Stevens, speaking at a dinner of business economists, also made clear that interest rates were likely to remain very low for some time yet.
The Aussie fell as far as $0.8682 overnight, but has since recovered to $0.8714. (Editing by David Gregorio)
© Thomson Reuters 2014. All rights reserved.
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