* Japan intervenes for first time in six years
* Dollar rises to 85.77 yen, runs into strong offers
* Key resistance above 86 yen still untested (Recasts throughout; adds comments, details)
NEW YORK, Sept 15 (Reuters) - Japan intervened in global currency markets on Wednesday, pushing the yen down 3 percent against the dollar, but it was uncertain the intervention would depress the currency for long.
Dealers said the Bank of Japan spent $20 billion or more to weaken the currency against the dollar, which staged its biggest daily gain against the yen in nearly two years.
By mid afternoon in New York, the dollar had climbed as high as 85.78 yen on electronic trading platform EBS, and 85.77 on Reuters up from a 15-year low beneath 83 yen. It last traded at 85.63 yen. The dollar looked poised to break resistance on the 50-day exponential and simple moving averages, if not on Wednesday then in coming days.
That said, analysts remain unconvinced the Bank of Japan will be able to successfully fend off the rising yen.
"It probably takes a lot more money than any central bank is willing to print to defy the larger economic forces at work," said Dan Cook, senior market analyst at IG Markets in Chicago.
The euro, sterling and Australian dollar also soared against the yen as a result of the Japanese intervention, which the Ministry of Finance said was carried out without any foreign assistance.
The timing caught markets off guard, coming after Prime Minister Naoto Kan won a party leadership election over a challenger who was a more strident advocate of intervention.
It also came when speculators were heavily positioned in favor of the yen, forcing them to buy back the dollar aggressively and accelerating greenback gains.
Among winners on Wednesday were Japanese exporters who were able to exchange dollar earnings above 85 yen. Some analysts said China was likely to welcome Japan's moves as it would dampen U.S. pressure on Beijing to allow its own currency to rise against the dollar.
"What we have seen is a few people come in and buy yen at these levels, but the thing is that the yen is still very very strong," said Brendan McGrath, manager of business solutions at Custom House, a Western Union company, in Victoria, British Columbia with corporate clients based in the U.S., Canada, Australia and New Zealand who need to hedge currency risk.
The euro rose 3.2 percent to 111.35 yen, on track for its best day since February 2009, while the Australian dollar rose 3.2 percent and sterling 3.7 percent. The euro rose 0.1 percent against the dollar to $1.3008.
LINE IN THE SAND AT 85?
A softer yen makes Japanese exports cheaper and boosts company profits, relieving pressure on a fragile economy. Nomura currency strategist Jens Nordvig said Japan will try to keep the dollar above 85 yen and it could get as high as 87 yen in the days ahead. But he said a weak U.S. outlook would eventually push it back below 83 yen by year-end.
December dollar/yen futures were last at 85.52 yen
New York traders said a weaker dollar-yen trend would remain intact until the dollar tests 86.70, the 38.2 percent retracement of its June-to-September decline.
A 15-month Japanese intervention campaign that ended in 2004 cost about 35 trillion yen and achieved mixed results.
UPHILL BATTLE
The Bank of Japan started buying the dollar around 0130 GMT on Wednesday and has been active since, with $2-3 billion spent in early New York hours, traders said.
Billionaire George Soros told Reuters Insider Japan was right to weaken the yen.
CitiFX strategists said many investors appeared to open short dollar-yen trades at "unattractive levels," which suggests the unwind of those trades may aid BoJ efforts. But preventing yen strength could prove difficult if the Federal Reserve decides to pump more money into the U.S. economy to prevent a faltering recovery from stalling.
Recent signs of weakness in the U.S. economy have narrowed the gap between U.S. and Japanese bond yields, prompting investors to ditch dollar-denominated assets and buy yen. U.S. yields fell on Wednesday, as investors bet that Japan would recycle some of their massive dollar purchases into U.S. government debt.
"There is a potentially 'vicious circle' dynamic to it," Nomura's Nordvig said.
By the Bank of Japan buying short-dated Treasuries, the difference in short-term yields between the U.S. and Japan could become more pronounced in favor of Japan, causing more repatriations to Japan and yen strength even as the Japanese central bank attempts to weaken the yen.
It remains unclear whether this will happen, though as sources familiar with the matter said the BOJ was ready to leave the intervention unsterilized rather than drain the funds that went into the currency market. Chavez-Dreyfuss and Vivianne Rodrigues in New York and Jessica Mortimer in London; Editing by Andrew Hay) (Reporting by Nick Olivari and Steven C Johnson)