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The yen fell on Friday to near a 10-month low against the euro and below its 200-day moving average versus the dollar on expectations for a strong U.S. jobs report, which could put further pressure on the currency.
Speculation was growing that non-farm payrolls data, due later on Friday, would be strong, reinforcing perceptions that U.S. economic recovery is on track and widening the yield differentials between dollar and yen assets further.
Analysts are forecasting that the U.S. economy will add 190,000 jobs in March. The data comes a day after hawkish comments from a U.S. Federal Reserve official gave traders more reason to think the Fed will raise interest rates before the Bank of Japan.
The dollar was helped after the Wall Street Journal reported that Minneapolis Federal Reserve President Narayana Kocherlakota signaled the Fed could raise interest rates by three quarters of a percentage point by the end of the year.
A recent series of hawkish comments by Fed officials have helped drive U.S. Treasury yields higher this week and caused the dollar's yield advantage over the yen to widen.
The BOJ will probably lag behind the Fed and the European Central Bank in raising interest rates, especially in the wake of the March 11 earthquake and tsunami that devastated Japan's northeast.
"A strong payrolls number would be reflected in the dollar/yen and it could rise to 84.50 in the short term," said Simon Derrick at Bank of New York Mellon. "We expect to see prolonged yen weakness due to loose monetary and fiscal policy in Japan."
The dollar rose above its 200-day moving average against the yen at 83.60 yen for the first time since June, a sign that the yen's uptrend may be coming to an end.
The dollar had tumbled to a post-World War Two record low of 76.25 yen in March, as the yen surged on the back of market speculation that Japanese investors may repatriate funds from abroad after the earthquake.
There has been little sign that such repatriation has taken place, and the yen later fell back after the Group of Seven intervened jointly to sell the yen on March 18. Japan conducted a total of 692.5 billion yen ($8.4 billion) in FX intervention in March, the Ministry of Finance said on Thursday.
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