* Dollar/yen fall of over 4 pct in 2 days
* Risk appetite fades a little
* Bank of Canada in focus later in day
By Jemima Kelly
LONDON, July 13 (Reuters) - The yen lost ground on
Wednesday, extending losses against the dollar after recording
its biggest two-day fall in almost two years, as risk appetite
bounced back in the European session.
The safe-haven yen had tumbled 4 percent against the dollar
since the start of the week, its worst performance since
November 2014, after Japan's Prime Minister Shinzo Abe's ruling
coalition won a clear victory in upper house elections, fuelling
expectations of more fiscal stimulus.
Monday's news that Britain would by Wednesday have a new
prime minister - current interior minister Theresa May - and a
bumper U.S. jobs report at the end of last week had also boosted
risk sentiment, which had served to further dent the yen.
Some investors had hoped that former U.S. Federal Reserve
chair Ben Bernanke's meetings with Japanese leaders this week
would herald the adoption of "helicopter money", a term which
Bernanke has in the past mentioned as a way central banks might
finance government budgets to fight deflation.
But the dollar hit a session low of 103.95 yen JPY=
shortly after Chief Cabinet Secretary Yoshihide Suga downplayed
the idea.
Nevertheless, the dollar recovered lost ground and was last
trading at 104.80, up 0.1 percent on the day. The euro was also
up 0.2 percent at 116.02 yen EURJPY=
"Globally we are seeing an environment where investors are
buying riskier assets and that is putting the yen under
pressure" said Petr Krpata, currency strategist at ING. "There
is a lot of expectations of some mega stimulus from Japan. If
they disappoint, we could see the yen bounce back."
Currencies seen as riskier plays that had rallied sharply on
Tuesday such as the Australian dollar AUD=D4 and the New
Zealand NZD=D4 dollar, which had hit a 14-month high, were all
trading higher.
Later in the day, a Bank of Canada meeting on monetary
policy is in focus. Though analysts are not expecting an
interest rate cut, they think a dovish tone could be struck in
the wake of the vote for Brexit, which could weigh on the
Canadian dollar, which was up 0.2 percent. CAD=D4
"With consumption still running soft and job and wage gains
muted, the accompanying monetary policy report and press
conference could emphasize downside risk," analysts at BNP
Paribas wrote.
"Rates markets are currently pricing only small chance of
further policy easing and have room to increase pricing if the
Bank starts to sound more concerned."
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