* Market keen to see if dlr hits 15-yr low below 84.82 yen
* Traders: fall below 84.82 could open way to all-time low
* Talk of further policy easing by Fed undermines dollar
* Expectation of no action from BOJ lifts yen
* Dollar index stays below 200-day moving average
By Rika Otsuka
TOKYO, Aug 4 (Reuters) - The dollar hit an eight-month trough
against the yen on Wednesday, crawling towards its lowest level
since 1995, as weak U.S. data and talk of the Federal Reserve
embarking on further policy easing pushed down Treasury yields.
The dollar fell as far as 85.32 yen, its lowest since late
November, and was trading at 85.40 <JPY=>, down 0.4 percent on
the day. A fall below a November low of 84.82 yen would take the
pair to its lowest level in 15 years.
Hefty options barriers are seen set around 85 yen, meaning a
drop in the dollar could pick up speed below that level.
Traders said a decline beyond the November level could open
the way for the greenback to slide to an all-time low below 80
yen, hit 15 years ago.
Many now believe it is only a matter of time before the
dollar posts a 15-year low, given the difference between U.S. and
Japanese authorities' stances in their foreign exchange policies,
analysts and traders said.
"The biggest reason the dollar has fallen this much against
the yen is that the United States clearly wants a weaker dollar,"
said Ayako Sera, market strategist at Sumitomo Trust & Banking.
"Washington wants a weaker dollar as it would help the
economy avoid deflation."
Some market players are speculating the Fed could further
relax its policy at an August 10 meeting, and there is also some
talk that the market has switched its focus to funding the carry
trade in dollars rather than the yen.
Meanwhile, traders doubt the Bank of Japan will adopt
additional steps to further ease its policy at an Aug 9-10
meeting.
"The market believes the BOJ has their hands tied with
regards to intervention," said Tsutomu Soma, senior manager of
the foreign securities department at Okasan Securities.
"The yen is not yet very strong against other currencies
besides the dollar, leaving the BOJ little to justify such action
with."
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Dollar/yen at 8-month lows http://link.reuters.com/hyw23n
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The dollar index, a gauge of the greenback's performance
against major currencies, was little changed at 80.680 <.DXY>,
remaining below its 200-day moving average, now at 80.744.
It fell as low as 80.469 the previous day, dropping below its
200-day moving average for the first time since January, which
analysts said signals further falls.
The index is threatening to revisit April lows at 80.031,
while support lies at 79.724, the 61.8 percent retracement of its
November to June rally.
Investors were on watch for comments from Japanese
authorities, although most think currency intervention is
unlikely before dollar/yen breaks the 15 year-low.
Japan's finance minister reiterated on Wednesday that he is
closely watching currency moves. []
The euro dipped 0.2 percent from late U.S. trade to $1.3205
<EUR=>, remaining within sight of a three-month high of $1.3262
reached on trading platform EBS on Tuesday.
Players have become more comfortable about picking up the
single European currency after it earlier this week broke above
$1.3125, a 38.2 percent Fibonacci retracement of its decline from
November to June. Some now say the euro is likely to extend its
gains to the 50 percent retracement around $1.3510.
Stronger growth in Europe and Asia have given rise to the
view that central banks in those regions could raise interest
rates before the Fed.
Data on Tuesday showed U.S. home purchase contracts tumbled
to a record low in June, while factory orders fell more steeply
than expected, implying an anaemic economic recovery for the
remainder of this year. []
The data also kept alive talk that the Fed might start a new
round of Treasuries purchases to pump funds into the economy, as
it did during a recent quantitative easing campaign.
On the back of weak data and the Fed speculation, U.S.
two-year Treasury note yields on Tuesday fell to a record low,
suggesting limited upside for the dollar.
"The dollar's fall has been driven by expectations of cheaper
U.S. interest rates," said Masafumi Yamamoto, chief FX strategist
at Barclays Capital.
"If U.S. payroll data exceeds market expectations, there
could be (upward) adjustments in the dollar/yen, too," he said.
The positive correlation between the U.S. and Japanese
two-year yield spread -- a spread which has been shrinking -- and
dollar/yen rate has strengthened on a 90-day basis to more than
0.9. The correlation is at its highest since the post-Lehman
period when the spread and dollar/yen were plunging.
Traders said readings of Friday's monthly U.S. jobs report
will likely set a near-term direction for the dollar.
(Additional reporting by Hideyuki Sano, editing by Charlotte
Cooper)
