Low yield keeps yen near 4-1/2-yr low vs dollar

TOKYO, June 21 (Reuters) The yen hovered near a 4-1/2-year low versus the dollar on Thursday, hurt by more signs that it will remain a low-yielding funding currency for investors purchasing higher-yielding currencies in carry trades.

The yen drifted away from a record peak against the euro but traders said it was just a matter of time before the single currency scaled a new high against the Japanese currency.

''The basic trend of currencies with prospects of rising interest rates strengthening remains intact,'' said Nobuo Ibaraki, a forex manager at Nomura Trust and Banking.

The Bank of Japan is also expected to boost interest rates as early as August, but the yen is pressured as interest rate differences with other countries remain wide and keep Japanese investor appetite for higher-yielding foreign assets, he said.

''Because the yen's slide has been rapid, the market is expected to move sideways for now given a lack of major data or events. The yen's weakening trend will likely continue as there appears to be no clear bottom,'' Ibaraki said.

The dollar was near 123.49 yen little changed from late Wednesday U.S. trade and just off a peak of 123.76 yen struck earlier in the week on electronic trading platform EBS, the highest since December 2002.

The yen has lost about 2 percent against the dollar in just about two weeks. Traders said a break above 124 yen may need some time while support at 123 yen looked firm.

The euro was also little changed at 165.49 yen moving away from the all-time high of 166.12 yen hit on EBS earlier in the week.

The single European currency was steady at $1.3396.

Minutes from a Bank of England policy meeting in June released on Wednesday showed that BoE Governor Mervyn King and three other Monetary Policy Committee members opposed keeping interest rates steady at 5.5 percent but were outvoted by the remaining five members.

Market players perceived the minutes to suggest that the central bank would raise interest rates as early as next month.

Sterling rose across the board, hitting a fresh 15-year high against the yen The New Zealand dollar changed hands at $0.7593 near a 22-year peak of $0.7640 hit earlier in the month and close to the levels when the New Zealand central bank first confirmed it had intervened to sell the currency last week.

The pound was at $1.9921 and 246.12 yen.

REUTERS PDS BST0730