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Yen slides as Europe braces for rate hikes -Breaking

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© Reuters. This February 28th, 2013 photo illustration shows light reflecting off a Japanese 10,000yen note. REUTERS/Shohei Miyano/Illustration/File Photo

Tom Westbrook

SINGAPORE, (Reuters) – The yen fell to a 20-year low against the dollar and fell to a seven year low against the euro on Wednesday as traders waited for a European Central Bank meeting that would likely leave Japan isolated among its peers who are sticking with ultra-easy monetary policies.

Markets expect the ECB to meet on Thursday. If not, it will at least set the stage for rapid rate increases.

While the U.S. Federal Reserve expects to increase its benchmark interest rate by 50 basis point next week, and then again in July, Bank of Japan officials are not indicating that they will abandon accommodative settings.

In eight sessions, the yen lost 4.5% on dollar from 127.09 to touch 133.22. This is due to investors seeing rising consumer prices that force central banks all over the globe to reduce demand by imposing rapid increases.

In the last trading session, it was at 133.22 per dollar. The yen has dropped more than 6 percent in 10 sessions, to a low of 96.12 Australian dollars in seven years. This is a rapid decline after an unexpectedly large rate increase in Australia Tuesday.

The euro is now down for 10 consecutive sessions, the longest losing streak it has seen in 8 months. It also found an eight-month low of 142.36 in Asia early trade, a 7-year high.

Matt Simpson (a top market analyst with brokerage City Index) stated, “Yield differentials still favor the U.S. dollars, with breaking below 132.”

He said, “It’s quite obvious that the BOJ favours yield curve control over a stronger currency.” “135 is the next major line in the sand – the February 2002 high.”

As traders waited for U.S. inflation numbers due Friday, Asia saw other modest moves. After a minor dip overnight in U.S yields, the dollar stabilized.

The risk-sensitive Australian dollars and New Zealand dollar were a bit more stable, with the leaving at $0.7223 and $0.6473 respectively.

Sterling hovered around $1.2575, but the euro fell marginally to $1.0689.

Kit Juckes from Societe Generale (OTC), strategist, said: “Quantitative tightening is replacing quantitative ease and 100 basis point Fed rate rises this summer. You buy bonds and you sell the dollar at all costs.”

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Prices for currency bids at 0136 GMT

Description: RIC U.S. Last Close Pct. Change YTD High Bid Low

Previous changes

Session

Euro/Dollar

$1.0692 $1.0705 -0.12% -5.95% +1.0712 +1.0685

Dollar/Yen

133.0200 132.6400 +0.30% +15.67% +133.2050 +132.6500

Euro/Yen

142.23 141.93 +0.21% +9.14% +142.3600 +141.9900

Dollar/Swiss

0.9741 0.9728 +0.13% +6.79% +0.9748 +0.9729

Sterling/Dollar

1.2580 1.2590 -0.12% -7.02% +1.2597 +1.2568

Dollar/Canadian

1.2531 1.2534 +0.01% -0.86% +1.2541 +1.2528

Aussie/Dollar

0.7230 0.7233 -0.05% -0.55% +0.7234 +0.7219

NZ

Dollar/Dollar 0.6481 0.6489 -0.14% -5.33% +0.6491 +0.6473

All spots

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Volatilities

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