* Dollar/yen trades below 85, not far from 15-year low
* BOJ expands fixed rate fund supply program
* Euro falls vs dollar as stocks decline
(Adds comments, details; changes byline)
By Aleksandra Michalska and Vivianne Rodrigues
NEW YORK, Aug 30 (Reuters) - The yen rose broadly on Monday
after the Bank of Japan's decision to expand cheap loans to
banks disappointed investors who had looked for more aggressive
measures to curb the yen's strength.
The dollar fell below 85 yen and the euro lost more than 1
percent against the Japanese currency after the BOJ beefed up
the supply of fixed-rate loans to banks to 30 trillion yen
($351 billion) from 20 trillion yen.
Investors saw the central bank's moves as a symbolic
gesture that will do little to halt the yen's climb, putting
the onus on the Japanese government to act to protect exports
and fight deflation if the yen continues to rally. For details,
see []
"The Bank of Japan's move was fairly incremental. It was
just an extension of already existing plan," said Sacha
Tihanyi, a currency strategist in Toronto at Bank of Nova
Scotia's Scotia Capital. "I don't get the sense that what the
BOJ is doing will move the yen anytime soon."
In late afternoon trading, the dollar fell 0.7 percent to
84.60 yen JPY=, down from the day's high above 85.92 hit before
the BOJ announcement, according to Reuters data. The dollar
earlier hit a session low of 84.56 yen, not far from its
15-year low of 83.58 yen set on electronic trading platform EBS
last week.
"The yen will probably stay exactly where it is now, said
Nick Bennenbroek, head of currency strategy at Wells Fargo.
"Clearly, additional monetary policies and extra funds that the
Bank of Japan added aren't enough to see the yen weaken."
Adding to strength in the yen were comments from Bank of
Japan Governor Masaaki Shirakawa, who said after meeting with
Prime Minister Naoto Kan that Kan had not made any requests
regarding the central bank's monetary policy. Shirakawa refused
to comment on recent currency moves.
Earlier in the day, Shirakawa said policy steps will not be
bound by moves in the yen and stocks and the rise in the yen
was down to investor aversion to risk. []
ADDING TO LONG POSITIONS
The BOJ's move and the official comments encouraged
investors to add to long yen positions on speculation that
currency intervention by Japan was not imminent.
A trader said stop-loss orders to sell the dollar under
84.90 yen helped accelerate the pair's slide. Support comes in
at around 84.50, while resistance is at 86 yen. The euro
EURJPY=R fell 1.2 percent to 107.36 yen.
Aside from the yen, currency movements were limited in
European trade, with London markets closed for a holiday.
The euro lost 0.8 percent to $1.2661 EUR=, as losses in the
U.S. stock market weighed on risk appetite.
Investors are now turning attention to the release on
Tuesday of minutes from the U.S. Federal Reserve's Aug. 10
meeting to get further insight into why policy makers opted to
buy more Treasury securities. Following that is the widely
watched U.S. non-farm payrolls report on Friday.
INEFFICIENT TRADE
Data from the Commodity Futures Trading Commission showed
investors increased long positions in the yen and the Swiss
franc in the week to Aug. 24 as worries about a slowing global
economy drove investors to perceived safe-haven currencies.
[]
Until recently, the Japanese yen was one of the most widely
used funding currencies in so-called carry trades, in which
investors borrow in a low-yielding asset to finance purchases
in higher-yielding currencies.
But as the Japanese currency has strengthened, its
efficiency as a funding currency has diminished.
In fact, using yen to fund the carry trade has not been a
good strategy in 2010 to date, according to Reuters data.
Borrowing 1 million yen to buy the equivalent in New Zealand
dollars would have lost an investor 93,415.61 yen; buying
Australian dollars would have lost an investor 66,266.38 yen.
Analysts expect the yen to rise further against the dollar
if expectations mount that the U.S. Federal Reserve will act to
spur growth, moving more aggressively than the BOJ.
Fed Chairman Ben Bernanke said on Friday the U.S. economic
recovery has weakened more than expected and the Fed stands
ready to act if needed to spur slowing growth. []
(Additional reporting by Wanfeng Zhou and Nick Olivari in New
York; Editing by Leslie Adler)
