* Yen hits 11-mth lows vs euro, 6-mth lows vs dollar
* Carry trade revival hurts, BOJ seen keeping policy loose
* Euro climbs to 14-mth high vs dollar; ECB ahead
(Updates, add details, quote)
By Anirban Nag
LONDON, April 6 (Reuters) - The yen slid on Wednesday to an
11-month low against the euro and a six-month low against the
dollar, while the euro hit its strongest in more than a year
versus the dollar in anticipation of a euro zone rate hike.
More losses were expected for the yen as investors such as
macro hedge funds add to bearish bets, with the Bank of Japan
looking set to lag other central banks in tightening policy.
The euro rose as high as $1.4317 <EUR=>, its highest since
late January 2010, with traders reporting steady buying by Asian
central banks. Large option barriers cited at $1.4350 and
$1.4400 could cap gains in the near term, however.
"Global risk sentiment is picking up and there is abundant
liquidity which is even isolating the euro from its peripheral
debt problems," said Lena Komileva, head of G-10 currency
strategy at Brown Brothers Harriman.
"The yen is taking a lead as the global carry trade makes a
return with the Bank of Japan likely to ease policy while the
other central banks seek to tighten it".
The struggling Japanese unit was threatening to breach key
long-term support levels against most currencies, having already
fallen to a 2-1/2 year low against the Australian dollar.
The yen has slid since the first G7 intervention in a decade
last month, stirring talk of a carry trade revival -- a strategy
of selling low-yielding currencies to fund investment in
currencies with higher interest rates.
The euro was up 0.8 percent at 121.70 yen, having hit an
11-month peak of 121.97 <EURJPY=R>, with stop-loss buying
earlier in the session adding to its rise.
The dollar was up 0.2 percent at 85.12 yen, easing from
highs on profit taking by Japanese retail investors. It scaled a
six-month peak of 85.53 yen <JPY=>, having surged 12 percent
from its post-World War Two record low of 76.25 yen hit in
March, days after Japan's northeast was devastated by a massive
earthquake and tsunami.
The high-yielding Australian dollar <AUDJPY=R> surged to
88.68 yen, its highest since September 2008, with 90 yen seen as
the next possible target.
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For a graphic on dollar/yen resistance levels, click on
http://link.reuters.com/hyk88r
Reuters Insider: How to Trade the ECB Rate Rise:
http://link.reuters.com/tam88r
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ECB RATE HIKE AHEAD
Unexpectedly strong German industrial orders data gave a
further lift to the euro [], which has been buoyed
by policymakers' signals that the European Central Bank will
raise rates by 25 basis points on Thursday. []
The currency has shaken off concerns about a debt crisis in
the bloc's weaker economies. Portugal's auction of six- and
12-month T-bills met healthy demand from investors but it came
at a cost of much higher yields, which some analysts believe
could force the country to seek a bailout. []
On Thursday, the focus will be on ECB President Jean-Claude
Trichet's news conference after the rate decision to see whether
he signals further hikes ahead. In contrast with the ECB, the
Bank of Japan ends its two-day meeting on Thursday and should at
least signal a willingness to ease further. []
The euro was near some longer term resistance levels against
the yen. On weekly Ichimoku charts, a form of Japanese technical
analysis that is widely used among market players, the top of
the cloud comes in right around 122 yen.
The dollar also faced chart resistance, with a trendline
drawn off its June 2007 peak around 124 yen now lying roughly
around 85.65 yen. Its 55-week moving average comes in near 85.80
yen, followed by the dollar's mid-September peak at 85.94 yen.
Some market players say the dollar's rise above its 200-day
moving average last week suggests that a long-term uptrend in
the yen is about to shift, drawing investors who may have missed
some yen weakness in late March to jump on the move.
"We would allow for profit taking here but then look for a
break higher to 87.55 yen then 94.50," Commerzbank analysts said
in a note.
The dollar may come under pressure, however, as the prospect
of a U.S. government shutdown looms, with President Barack Obama
failing on Tuesday to break a deadlock in budget talks between
his Democrats and Republicans. []
The euro was last up 0.5 percent at $1.4295.
(Additional reporting by Jessica Mortimer; Editing by Toby
Chopra)
