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Yen surges to 1-month highs vs dollar, euro

By Staff
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TOKYO, Feb 24 (Reuters) The yen surged to one-month highs against the dollar and the euro on Friday, extending gains made the previous day on the Bank of Japan governor's strongest signal yet that the central bank will eventually raise interest rates.

The yen had climbed more than 1 percent against the dollar on Thursday, spurred higher after Toshihiko Fukui said the BOJ's policy of flooding the market with excess funds was coming to an end and that rates would eventually rise to a ''neutral'' level.

''The sell-off triggered by Fukui's comments yesterday is continuing,'' said Kaoru Kondo, chief analyst at Fisco.

Traders said that an unwinding of carry trades -- in which investors borrow in a low-yielding currency like the yen to invest in assets of higher-yielding currencies -- had also helped to give the yen a lift.

In early Asian trade, the dollar was at 116.60 yen after nose-diving about 0.5 percent to around 116.40 yen, its lowest level since Jan. 27.

Some traders said that the U.S. currency could find support around 116 yen, where importers were seen lined up to buy the dollar.

The euro was at 139.10 yen after spiking down half a percent to 138.84 yen on electronic trading platform EBS, its lowest level since mid-January.

The single currency was little changed at .1920.

Speaking to a parliamentary committee on Thursday, Fukui repeated that the Japanese economy and consumer prices were on an uptrend, helping to solidify the market's view that the BOJ will end its quantitative easing policy by late April.

Some traders continued to buy the yen on Friday, latching onto Fukui's comments that the central bank would ''eventually move step by step to a neutral interest rate level''. Some in the market took that as a signal the BOJ could begin raising rates sooner than expected after ending the easing policy.

REUTERS PDS VP0725

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