Yen wallows near record low to euro as BOJ keeps cautious tone after rate hike

By Kevin Buckland

TOKYO, Dec 22 (Reuters) - The yen languished near a record low to the euro on Monday, after Bank of Japan Governor Kazuo Ueda stuck to his usual cautious rhetoric following an interest rate hike on Friday.

The Japanese currency traded near an 11-month trough versus the U.S. dollar and just shy of a 17-month low on the Aussie.

A warning of possible currency intervention on Monday had little immediate effect on the market. Japan's top currency diplomat, Atsushi Mimura, said he was "concerned" about "one-sided and sharp" foreign exchange moves, and cautioned that officials "will take appropriate actions against excessive moves."

The BOJ raised the policy rate by a quarter point to a three-decade peak of 0.75% on Friday, in a clearly telegraphed move. The accompanying statement signalled a readiness to continue tightening policy, but Ueda, at his news conference, stressed the timing and pace of further hikes depended on incoming economic data.

The lack of any hawkish hints sent the yen tumbling 1.3% versus the euro, 1.4% against the greenback and 1.5% against the Aussie, even as it triggered a broad selloff in Japanese government bonds that sent the 10-year yield - which moves inversely to the price - soaring past the symbolic 2% mark to the highest since 1999.

"While the BOJ statement noted that real yields remain 'significantly low' - potentially signalling further tightening ahead - Governor Ueda's press conference offered little new insight, reiterating a data-dependent approach," Tony Sycamore, an analyst at IG, wrote in a client note.

"The absence of clearer guidance on the pace of future hikes disappointed markets, triggering yen selling."

A decisive break above 158 yen per U.S. dollar would open the way to the high for the year from January at around 158.87, he said.

The U.S. dollar edged down 0.1% to 157.56 yen on Monday, but remained close to last month's high of 157.90.

The euro eased 0.1% to 184.51 yen, staying within touching distance of Friday's record peak at 184.75. The single currency was flat at $1.1714.

The Aussie weakened slightly to 104.20 yen, but was not far from the 104.39 yen mark reached earlier this month for the first time since July of last year. It rose 0.1% to $0.6616.

The Aussie-yen pair "still has fundamental support from solid risk sentiment and more recently, by wider interest rate differentials between Australian and Japanese ten-year government bond yields," Commonwealth Bank of Australia analysts wrote in a client note, forecasting a rise to 109 yen per Australian dollar by March.

(Reporting by Kevin Buckland; Editing by Sonali Paul)