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UPDATE 1-G7 yen-selling intervention estimated at Y530 bln

Published 03/22/2011, 07:03 AM
Updated 03/22/2011, 07:05 AM

* BOJ data suggests G7 yen selling far smaller than market talk

* Smaller intervention does not mean weaker commitment - analyst

* BOJ intervention data due on March 31 (Adds detail, background)

TOKYO, March 22 (Reuters) - The Group of Seven (G7) countries may have sold a total of around 530 billion yen ($6.5 billion) on Friday as they intervened in forex markets to weaken the currency, data from the Bank of Japan showed on Tuesday.

The amount is far smaller than market talk that they could have sold around 2 trillion yen, though some analysts said the figure was not a surprise.

"My impression is that the dollar rose smoothly in light trading volume on Friday," said Osamu Takashima, chief FX analyst at Citibank Japan.

" In September, when Japan unilaterally intervened, there was heavy dollar selling to counter intervention. Compared to that, trading volume looked smaller this time."

Any yen the BOJ and other central banks sold for dollars would be paid into banks on Wednesday as currency trades are settled two business days after transactions and the country's markets were closed for a holiday on Monday.

The BOJ's projection for Wednesday's money markets showed there would be 830 billion yen in payments to banks from the public sector. That is 530 billion yen more than the about 300 billion yen of payments from the government that money brokers had been expecting ahead of intervention.

Market players say the difference between their expectations and the projection is likely to indicate how much yen G7 central banks sold on Friday, although money broker estimates are ballpark figures with a margin for error.

The G7 countries intervened jointly to stem the yen's strength on Friday -- their first coordinated currency intervention in more than a decade -- after the yen soared to a record high of 76.25 yen per dollar .

The U.S. Federal Reserve, Bank of England, Bank of Canada and European Central Bank, each separately confirmed they intervened to keep the yen's value from climbing, though the BOJ's intervention was thought to be by far the largest.

"I don't think the market feels the commitment of intervention is weak despite the amount coming in much smaller than expected," said Junya Tanase, forex strategist at JPMorgan Chase Bank in Tokyo.

"I don't think the market will start selling (the dollar) after seeing this result. The market is still concerned about possible intervention."

Many analysts think coordinated intervention is more powerful than unilateral moves because it sends a strong message that those who participate in intervention share a common view on markets.

Juergen Stark, who heads the ECB's influential economics unit, said on Tuesday that G7 members were willing to repeat last week's intervention if Japan decided it was necessary.

Friday's intervention marked the first time Japan had intervened since Sept. 15, when it sold 2.12 trillion yen, a record daily amount.

The Ministry of Finance will announce on March 31 how much it spent on currency market intervention in March. ($1 = 81.045 Japanese Yen) (Reporting by Hideyuki Sano; Editing by Joseph Radford)

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