23 February 2007, 09:56  Dollar near 4-year high vs yen

The dollar hovered near a four-year high against the yen on Friday and the euro struck an all-time peak as the Japanese currency's slide extended after the Bank of Japan emphasised this week it would be slow in raising interest rates. The BOJ's rate increase to a decade-high of 0.5 percent on Wednesday did nothing to stem the yen's broad slide against major currencies due to Japan's still extremely low rates, a vestige of the central bank's efforts to drag the economy out of deflation. Expectations that tepid inflation will keep the BOJ on hold for about six months have spurred investors to use the low-yielding yen as a cheap source of funds to buy higher-yielding currencies and assets in the carry trade. For the week, the euro was up 1.6 percent against the yen and poised for its biggest weekly gain since September 2005. With a high of 159.63 yen on the day, traders said it was a matter of time before the euro vaulted over the 160 yen level. But analysts said profit-taking may start to limit the yen's slide in the near term, partly because the short positions built up by various market players have become so large. "The pace will slow because market participants, including speculators, already have a large amount of yen short positions after the BOJ decision," said Koji Fukaya, senior currency strategist at Deutsche Bank in Tokyo.

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