WSJ:WORLD FOREX: Dollar Hits 1-Month Low Vs Yen Ahead Of FOMC Outcome
-- All eyes are on whether Fed will take easing steps in addition to expected twist operation
-- Dollar may fall further if Fed is aggressive in easing
-- Euro's trend remains downward, possible it to fall below Y89.0, analyst says
By Takashi Mochizuki
Of DOW JONES NEWSWIRES
TOKYO -(Dow Jones)- The dollar fell to a one-month-low against the yen on Wednesday in Asia as investors speculate that the Federal Reserve will be aggressive in easing its policies to prop up the world's largest economy.
At the closely-watched Federal Open Market Committee meeting that ends later in the global day, investors will be focused on whether the Fed will take easing steps in addition to much-awaited "Operation Twist, which is about selling short-term Treasury bonds and buying long-term ones.
Expected easing measures include cutting its key interest rates which is likely to push the greenback even lower, said Toshihiko Sakai, a senior manager at Mitsubishi UFJ Trust and Banking.
The high expectations for the Fed's aggressive easing actions mean market participants will be disappointed if the Fed only takes the twist operation, Sakai said. That will result in higher Treasury yields and gains in the dollar.
As of 0450GMT, the dollar was at Y76.34 from Y76.46 in New York Tuesday after hitting the one-month low of Y76.11.
The euro was at $1.3719 from $1.3703 and Y104.73 from Y104.76.
The euro's trend remains downward due to Europe's sovereign debt crisis, dealers in Tokyo noted. The common currency may fall below Y89.00 if it breaches below a psychologically important mark of Y100.00, said Barclays Capital's chief Japan currency strategist Masafumi Yamamoto.
He added it's worth paying attention to whether Japan is really going to buy more European bonds after Prime Minister Yoshihiko Noda told Wall Street Journal in an interview that "Japan needs to make a certain contribution going forward."
If Japan goes ahead, how to fund the purchase would attract investors' attention, Yamamoto said, adding selling the yen for the euro would be one option.
Still, Tokyo dealers said that way is still not a mainstream idea, adding the most-likely scenario would be using the euros that Japan already has.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at about 76.93 from 77.021.
Interbank Foreign Exchange Rates At 00:50 EDT / 0450 GMT
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