WORLD FOREX: Yen At 7-Week Low Vs Dlr On Higher Treasury Yield

The yen hit a fresh 7-week low against the dollar in Asia Tuesday, as rising long-term U.S. interest rates prompted hedge funds to buy the higher-yielding currency.

In early Asian trading, the dollar rose at one point to Y91.49, its highest level since Oct. 30. At 0450 GMT, the U.S. currency stood at Y91.36, compared to Y91.19 in New York late Monday, while the euro had climbed to Y130.58 from Y130.25.

Market focus is now on Bank of Japan Gov. Masaaki Shirakawa's speech at 0700 GMT for signs of further monetary easing steps, which could cause the yen to widen its losses, dealers said.

Shirakawa said Monday in an Japanese TV interview that the central bank is ready to act "promptly and boldly" to fight deflation if necessary, hinting at the possibility of taking additional easing measures.

The yield on the benchmark 10-year U.S. Treasury note, which moves inversely with prices, rose to a 4-month high of 3.702% in early Tokyo hours. That prompted U.S. hedge funds to adjust their portfolios by buying high-yielders like the dollar and euro, dealers said.

"Stop-loss (buying) orders were triggered above Y91.00 by U.S. hedge funds," said Hiroshi Maeba, a senior trader at Nomura Securities. "The impact of each trade was magnified amid extremely thin market conditions as many players are away for the Christmas holidays."

Dealers said the dollar may briefly rise to Y92.00 and the euro to Y131.00 if the BOJ chief suggests details of additional monetary measures, pushing Japanese government bond yields lower.

Still, the dollar may remain in a Y89.00-Y92.00 range in a week to come, while the euro may stay in a Y127.50-Y132.50 band, currency analysts said.

"Players want to close their accounts rather than build positions aggressively ahead of the year-end," meaning the exchange rates are likely to remain range-bound, said Daisuke Karakama, a senior market economist at Mizuho Corporate Bank.

Against the dollar, the euro remained flat, trading at $1.4292 compared to $1.4283. The Dollar Index, which measures the currency's value against other major currencies including the yen, stood at 78.036 compared to 78.059 Monday.