Friday, April 29, 2016

FOREX-Yen heads for best week since 2008 as dollar bulls sag

* Dollar bulls capitulate after Fed, BOJ meetings

* Yen hits 18-month high, euro up 0.3 percent

* Worries over U.S. and global growth outlook growing

* China PMI on Sunday should set tone for next week

(Updates prices, adds comments)

LONDON, April 29 (Reuters) - The yen built further on Friday on a round of strong gains since the Bank of Japan meeting, moving to an 18-month high against the dollar and on course to rack up its biggest weekly gain since the 2008 financial crisis.

Poor U.S. growth numbers and the cautious tone taken by the Federal Reserve this week has squeezed hedge funds still backing a stronger dollar in the face of a market positioned negatively on the U.S. currency for the first time in a year.

By 0726 GMT, the euro was up 0.25 percent against the greenback, helping push the dollar index a third of a percent lower. Sterling, relieved by an easing of Brexit nerves in the past two weeks, hit a 3-month high of $1.4658

"If you were a dollar bull you were holding on for some support from the Fed this week. When it didn't quite materialize, people just gave up," said Richard Benson, co-head of portfolio investment at currency managers Millennium Global.

"If you ask me there is some significant nuance (taking us closer to a June hike) in what the Fed said. They maybe thought that statement would lead to people pricing it at 50-50 but the market just did not want to know."

The yen rose 3 percent against the dollar on Thursday in the wake of the Bank of Japan's decision to hold off from expanding its monetary stimulus further.

Some Japanese banks are skeptical on the yen's ability to gain further and many say the scale of the yen's move is rather a reflection of the lack of faith in the dollar.

But a year on from a German government bond sell-off that rocked markets, and with U.S. stocks at record highs and the U.S. economy showing signs of weakening, there are also some concerns that May could bring another global market wobble.

The first quarter GDP data on Thursday showed growth of just 0.5 percent in annualized terms.

"The dollar has really lost a lot of momentum," said Mitul Kotecha, head of Asia FX and rates strategy for Barclays in Singapore.

A key theme for the yen is whether the BOJ's decision to stand pat on Thursday is just a wait-and-see stance, or whether it means the bar will be higher for any further stimulus, said Stephen Innes, senior trader for FX broker OANDA in Singapore.

"Obviously, if anybody sides with the ineffectiveness of the current monetary policy and the likelihood that the bar is going to be pushed higher for any further easing, it doesn't bode well for dollar/yen recovery," Innes said.

The yen also pushed higher against the euro, which fell 0.6 percent to 122.01 yen. On Thursday, the euro shed 2.7 percent versus the yen.

(Additional reporting by Masayuki Kitano in Tokyo; editing by John Stonestreet)

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