Dollar softens but fresh rises tipped

TOKYO: The dollar edged down against the yen Tuesday following a dip in New York, although analysts expect further advances for the greenback as monetary policy in Japan and the United States diverges.

The dollar bought 120.18 yen in Tokyo Tuesday, compared to 120.78 in US trade Monday.

The euro was at $1.2305 and 147.98 yen against $1.2308 and 148.65 yen.

The dollar eased as Tokyo and Asian shares retreated on profit-taking, somewhat raising investor aversion to risk.

"There was no incentive-backed news," a senior bank dealer told Dow Jones Newswires.

But the market´s general expectation for the yen´s continued fall remained intact.

Investor demand for the greenback has ramped up since the BoJ widened its monetary base in October to try to kickstart the economy, at the same time as the US central bank looks to tighten policy with a rate rise in response to a strong economic recovery.
Friday saw the dollar climb above 121 yen for the first time in more than seven years after the Labor Department said US jobs growth picked up more than expected in November.

But while the greenback took a breather in New York Monday, experts expect it to continue appreciating against the yen through 2015.

"The possibility has increased that we will at some stage experience a (dollar/yen) level beyond 124.14," said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley, referring to the 2007 high before the global economic crisis.

The dollar is however showing signs of overheating -- sitting about 15 percent above its 52-day moving average, a reference point used to determine a currency pair´s direction.

Toshiyuki Umekawa, senior vice president of Mizuho Bank, also said some traders might adjust their positions while there are few catalysts to drive business.

The dollar also fell against other Asia-Pacific currencies.