FOREX-Dollar advances to a 4-1/2-month high vs yen


* Draghi plays down risk of negative deposit rates

* Dollar/yen hits highest since July after Fed minutes

* Minutes revive prospect of U.S. stimulus tapering soon

* Aussie falls; RBA says open-minded on intervention

By Gertrude Chavez-Dreyfuss

NEW YORK, Nov 21 (Reuters) - The dollar jumped to itshighest against the yen in more than four months on Thursday,still benefiting from Federal Reserve minutes released the daybefore that suggested U.S. policymakers could start scaling backstimulus earlier than expected.

The euro, meanwhile, recovered earlier losses against thedollar after European Central Bank President Mario Draghi playeddown the possibility of the central bank implementing negativedeposit rates. Reports on negative rates had pressured the euroon Wednesday, adding to losses after the Fed minutes came out.

"The Fed minutes did help the dollar a lot, especiallyagainst the yen, as it puts a December taper back onto thetable," said Vassili Serebriakov, currency strategist at BNPParibas in New York.

Many market participants expect the Fed to start reducingits bond purchases in March 2014.

The dollar rose to 101.10 yen, its highest since July10. It was last up 0.9 percent at 100.94 yen.

The yen came under strong selling pressure as market playersexpected Japanese monetary policy to stay ultra-loose for sometime.

"With U.S. monetary policy officials moving towardtightening while the BoJ (Bank of Japan) is fully committed toan expansionist policy, dollar/yen may be finally ready toresume its rally and if it can clear the resistance at 101.50 itmay target the yearly highs over the next several weeks," saidBoris Schlossberg, managing director of FX strategy at BK AssetManagement in New York.

The dollar showed little reaction to a mixed bag of U.S. jobless claims fell in the latest week, while amid-Atlantic business survey from the Philadelphia Fed showed areading that was the lowest since May.

The euro was up 0.3 percent at $1.3474, recoveringfrom an earlier one-week low of $1.3399.

Speaking in Berlin, the ECB's Draghi said the possibility ofnegative deposit rates was discussed at the ECB's last policymeeting and there had been no news since then. He said thecentral bank did not see deflation materializing.

The comments were interpreted as differing from an unsourcedreport on Wednesday, which said the ECB may consider makingbanks pay to deposit cash with it overnight and caused the euroto fall. An ECB spokeswoman declined to comment.

Much has been made about the contrast in the monetary policystances of the ECB and the Fed, but Jane Foley, senior currencystrategist at Rabobank in London, said that "until Fed taperingis upon us, euro/dollar will remain well supported in spite ofthe dovish threats of the ECB."

The euro rose 1.2 percent against the yen to135.97 yen, after hitting a four-year peak of 136.04 yen.

Earlier, weak French business activity data was offset bybetter-than-expected German business activity, although a soft reading for the euro zone as a whole continued to point to afragile economic recovery.

Sterling hit a four-year high of 163.16 yen andwas last at 163.06, up 1.2 percent.

Elsewhere, the Australian dollar fell 0.9 percentto a two-month low of US$0.9231 after Reserve Bank of AustraliaGovernor Glenn Stevens said he was "open-minded" on interventionto push the currency lower. The Aussie dollarlast traded at US$0.9243, down 0.9 percent.

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