The dollar hit a 3.5-month high versus the yen today as upbeat US economic data added fuel to a rally sparked by the Bank of Japan's monetary easing earlier in the week.
The dollar's rise also gained steam on stop-loss buying, and active bids from Japanese importers who have been caught off guard by its recent strength, traders said.
The yen fell broadly, hitting a 6.5-month low versus the Australian dollar and a two-month trough against the euro, as the Japanese currency extended its losses after the BoJ surprised markets this week by boosting its asset buying scheme by $130 billion and setting an inflation goal of 1 per cent.
"The near-term seems awfully likely to take dollar/yen higher," said Ray Farris, chief Asia strategist for Credit Suisse in Singapore.
The dollar will probably head higher against the yen, with yield spreads beginning to move higher in its favour, Farris said, adding that a focal point in coming months will be whether the BOJ conducts further easing if needed to achieve its inflation goal.
The dollar rose to a high of 79.18 yen on trading platform EBS at one point. That was the dollar's highest level against the yen since October 31st, when Japan sold a record 8.07 trillion yen in currency intervention after the dollar hit a post-second World War record low of 75.311 yen.
The dollar last stood at 79.14 yen, up 0.3 per cent from late US trade yesterday.
The dollar is up about 2 per cent so far this week against the Japanese currency, on track for its biggest weekly gain since the week spanning the end of October and early November, when Japan conducted its massive yen-selling intervention.
The euro clung to the previous day's gains, supported by hopes that Greece was close to clinching a second bailout package. The single currency was little changed at $1.3124 .
Against the yen, the euro hit a two-month high at 104.04 yen at one point, and last stood at 103.84 yen, up 0.2 per cent from late US trade yesterday.
The Australian dollar hit a 6.5-month high of 85.48 yen at one point, and was last changing hands at 85.20 yen, up 0.4 per cent on the day.
Helping support the Aussie dollar were the launches of Japanese investment trusts, or toushin, targeting investment in Australian dollar bonds, traders said.
Nomura Asset Management is due to launch two Aussie bond funds on Friday with upper subscription limits of 200 billion yen each. The funds plan to sell Aussie/yen call options to enhance returns, according to the prospectus of the funds.
One caveat is that actual launch sizes of Japanese investment trusts often tend to be much lower than their subscription limits.
A batch of upbeat US economic data yesterday helped lift the dollar against the yen and helped support risk sentiment.
The number of Americans filing for new unemployment benefits unexpectedly fell to a near four-year low last week, while factory activity in the Mid-Atlantic area expanded in February.
Reuters