Yen stuck near 4-1/2-year low

The yen was pinned near a 4-1/2-year low against the dollar and an all-time trough versus the euro on Monday, staying under pressure as investors kept selling the low-yielding currency in carry trades.
The New Zealand dollar recovered all the losses it incurred on suspected central bank intervention in the late US session on Friday, striking a 22-year high against the dollar and climbing near a 20-year peak against the yen.
Investors kept putting on carry trades by borrowing in low-yielding currencies like the yen to fund investment in higher-yielding currencies, brushing aside shaky equity markets and the Reserve Bank of New Zealand's suspected third bout of selling in two weeks to limit kiwi strength. "There aren't many people who want to buy yen," said a senior trader at Japanese bank.
Traders said the market was bracing for a deeper yen slide as a variety of Japanese investment trusts targeting foreign assets were expected to be launched this week, luring funds from households putting their summer bonuses to work.
With authorities from Taiwan to Switzerland seeming to take action to limit the use of their currencies to fund carry trades, more investors were turning to the yen for such borrowing and keeping it under pressure, traders said.
The dollar was little changed from late US trade at 123.90 yen near Friday's peak of 124.14 yen - the highest since December 2002. The euro was steady near 166.80 yen after striking an all-time high of 166.94 yen the previous session. The single European currency was little changed against the dollar at $1.3465. The high-yielding sterling rose as high as $2.0000 edging closer to 26-year highs set in April, and hovered near a 15-year peak against the yen.
Traders also shrugged off a warning from the Bank for International Settlements in its annual report over the weekend over a possible reversal of carry trades, calling the yen's broad decline "anomalous". The Bank of Japan is expected to raise rates to a 12-year high of 0.75 percent from 0.50 percent, most likely in August, but short-term Japanese rates would still be the lowest in the industrialised world.
"Traders feel safe to sell the yen because a weakening yen is supportive for Japan's economy, and there are no strong attempts by policy makers here to stop the falling yen," said Kengo Suzuki, currency strategist for Shinko Securities.
The Swiss franc, another favoured funding currency for carry trades, surged on Friday after monetary authorities let one-week repo rates rise, sparking some concern that the Swiss central bank may be trying to disrupt carry trades.
The Swiss franc extended its broad gains and hit a 16-year high against the yen at 100.86 yen. The dollar held near 1.2290 francs after having tumbled about 1 percent on Friday.
The New Zealand dollar jumped to $0.7687, the highest since the central bank let the currency trade freely in 1985, and it last changed hands at $0.7660. The kiwi reclaimed losses as traders covered short positions on no sign of intervention earlier in the session, as well as on demand from Japanese investors.
Traders said the New Zealand dollar briefly fell in late US trading on Friday after the Reserve Bank of New Zealand was rumoured to have sold the currency for US dollars. A central bank spokeswoman declined to comment.