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FOREX-Dollar jumps vs yen, intervention talk cited

Published 09/24/2010, 01:32 AM
Updated 09/24/2010, 01:36 AM

* Dollar/yen jumps nearly 1%, traders suspect intervention

* Euro bounces back after early dip

* Major Japanese banks buying dollar/yen

TOKYO, Sept 24 (Reuters) - The dollar jumped nearly 1 percent against the yen on Friday as traders cited talk that Japanese authorities have intervened in the market to stem the yen's creeping gains in the past few days.

The dollar's jump came after it had fallen to 84.26 yen on Thursday, its lowest level since Japan intervened last week, and traders said major Japanese banks were bidding up the dollar.

Japanese officials have stayed mum on whether they have intervened. Top currency diplomat Rintaro Tamaki declined to comment on market speculation, Jiji news agency reported. The Bank of Japan also said it had no comment.

The dollar rose to as high as 85.40 yen, rising more than 1 yen from day's low of 84.34 yen.

Some traders have speculated that an apparent lack of complaint by President Barack Obama on last week's currency intervention by Japan was seen as tacit approval by Washington of Japan's action.

Obama, who urged Chinese premier Wen Jiabao to take more action on the yuan on Thursday, did not mention currencies when he met with Japanese Prime Minister Naoto Kan, Kyodo news agency reported.

"The dollar could rise to above 85.50 but I doubt it will rise to around 86 yen as it has failed to hit that level when Japan last intervened," said a trader at a Japanese brokerage house.

Japan intervened on Sept. 15 minutes after the dollar hit a 15-year low of 82.87 yen, selling an estimated 2 trillion yen ($23.70 billion) in Japan's largest single-day yen selling intervention.

In the wake of that intervention, the dollar rose to as high as 85.94 yen.

Some traders also said a rumour that Bank of Japan Governor Masaaki Shirakawa might resign was also helping the dollar.

Shirakawa is seen by some market players as less aggressive about monetary easing than Federal Reserve Chairman Ben Bernanke and thus his departure could herald more aggressive attempts by the BOJ to easy monetary policy and cheapen the yen.

The greenback has been under pressure due to shrinking yield gaps between the dollar and the yen.

The two-year bond yield spread fell to around 29 basis points, the lowest in nearly two years, as expectations that the Federal Reserve will adopt quantitative easing brought U.S. bond yields closer to Japanese yields.

As the dollar broadly weakened, the euro edged up about 0.1 percent to $1.3330, ticking closer to a five-month high of $1.3441 struck on Wednesday.

It fell briefly on mounting worries over Ireland, but support at around $1.3280 proved solid. ($1=84.37 Yen) (Additional reporting by Charlotte Cooper and Reuters FX analysts Krishna Kumar in Sydney and Rick Lloyd in Singapore; Editing by Michael Watson)

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