LONDON: The dollar hit a four-month high against the yen on Thursday as expectations the Bank of Japan will ease monetary policy next week weighed on the Japanese currency.
The greenback rose 0.5 percent to 80.210 on the EBS trading platform, its highest since June 25. It firmed despite reported heavy offers just above 80 yen and traders said further gains were possible that could take it towards the late June peak of 80.63 yen.
The yen's recent weakness has been fuelled by talk of the Bank of Japan easing further to stimulate the Japanese economy when it meets on Oct. 30.
"We could see a fairly quick move up (after the Bank of Japan decision)," said Neil Mellor, currency strategist at BNY Mellor, adding that the next resistance level was around 80.40 yen.
Higher treasury yields after recent upbeat US economic data also contributed to the stronger dollar.
Initial jobless claims and durable goods orders numbers due later in the day will be closely watched for further clues to the health of the economy.
The euro rose 0.6 percent to 104.13 yen, bringing it closer to a 5-1/2 month peak of 104.59 yen hit earlier this week.
The single currency was up 0.2 percent at $1.2996, adding to gains made on Wednesday when European Central Bank President Mario Draghi told German lawmakers that fears of illegal funding of governments or stoking inflation were misplaced.
"It entails that he (Draghi) is committed to what he is saying, and that some of the tail risk has been removed from the euro," said Arne Lohmann Rasmussen, head of FX research at Danske Bank in Copenhagen.
The euro has traded within a range between $1.28880 and $1.3400 since mid-September, though some analysts forecast that a rise to $1.31 could see the euro run into selling pressure.
It hit a one-week low of $1.29205 on Wednesday after weak German business activity and sentiment data, while uncertainty over when Spain may seek a bailout was also expected to hamper its rise.
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