Yen seen vulnerable to BoJ easing expectations

Yen seen vulnerable to BoJ easing expectations

The yen regained some ground after hitting a three-month low against the dollar and five-month low against the euro on Tuesday, but looked vulnerable to expectations of more monetary easing from the Bank of Japan.

The euro also dipped against the dollar, although held firmly within the recent $1.28 to $1.3170 range it has traded in since mid-September.

Bank of Japan officials are leaning towards easing monetary policy again at the Oct. 30 policy meeting, according to sources familiar with its thinking. More easing would be likely to weigh on the yen, and help Japan's export-reliant economy cope with lacklustre global growth.

Some strategists said weakness in the yen may be overdone however, and the currency could rebound strongly if Japanese officials disappoint the market by easing less than expected.

"The market is a bit fixated on this meeting next Tuesday and no one wants to stand in front of a freight train," said Steven Saywell, head of FX strategy at BNP Paribas.

"There's potential for disappointment we are looking for opportunities to sell rather than chase the dollar higher."

The dollar hit a three-month high of 80.02 yen on trading platform EBS, its highest level since early July, before retreating to trade down 0.2 percent on the day at 79.81 yen.

While the dollar could face some offers from Japanese exporters at levels above 80.00 yen, it will probably find support at levels near 79.50 yen in the near term, said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.

The euro fell 0.4 percent to 103.96 yen, retreating from a five-month high of 104.59 yen hit during the Asian trading session.