The greenback rose as high as 104.84 yen, according to Reuters data,
surpassing last week's high of 104.63 yen. It last stood at 104.77
yen, up 0.4 percent on the day.
Option-related offers at 105 yen are seen as a major hurdle for the
dollar to advance further and some traders suspect this resistance
level may not be broken until next month, when more market
participants return from holidays.
Most financial centers in Europe and the Americas were closed for
Christmas on Wednesday, with many shut on Thursday as well.
Yen-selling could be a favorite trade among investors next year
because they expect the Bank of Japan to maintain, or even enhance,
its ultra-easy policy to conquer deflation. That contrasts with the
Fed's move last week to begin reducing its stimulus, although it has
said it still intends to keep interest rates low for a long time.
"The diverging policy outlook is what's really driving the yen
lower," said John Doyle, currency strategist at Tempus Inc in
The euro was little changed at $1.3682, some way off last week's
high of $1.3811, though the single currency has been on solid ground
on the whole in the last several weeks.
While the euro zone's recovery is seen as sluggish, the currency has
been underpinned by European banks' repatriation as well as buying
by euro zone exporters as the euro zone's current account surplus
has increased sharply.
The euro also hit a five-year high of 143.52 yen, and was last up
0.4 percent at 104.78 yen.
The dollar gave back some of the gains following news that Japanese
Prime Minister Shinzo Abe visited the controversial Yasukuni Shrine
for the war dead, a move that could worsen strained Sino-Japanese
relations and hurt investors' risk appetite.
The dollar index, which tracks the greenback against a basket of
major rivals, stood at 80.524 <.DXY>, up 0.1 percent on the day and
not far from last week's high of 80.827.
Data on Thursday showed the number of Americans filing new claims
for unemployment benefits fell last week to the lowest level in nearly a month,
a hopeful sign for the labor market.
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Rising U.S. yields have also supported the dollar because they are
likely to encourage investors to buy more dollar bonds.
The yield on 10-year U.S. notes rose to around 3.0 percent on
Thursday, near the two-year peak of 3.007 percent hit in September.
Rising U.S. yields are generally positive for the dollar because
they are likely to encourage investors to buy more dollar bonds.
Higher U.S. bond yields could also destabilize risk assets,
particularly those in emerging markets. That could prompt investors
to buy "safer" currencies, including the dollar.
"Initially the Fed appears to have succeeded in curtailing rate hike
expectations. But U.S. bond yields have risen since then, and we
need to keep an eye on them for implications on risk asset prices,"
said Junya Tanase, chief FX strategist at JPMorgan Chase in Tokyo.
The Australian dollar slipped 0.4 percent against a broadly
supported U.S. dollar to $0.8879, edging near three-year low of
$0.8860 hit last week.
(Additional reporting by Hideyuki Sano
in Tokyo; editing by Nick Zieminski)
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