Expectations that minutes of its last meeting will show some U.S.
Federal Reserve officials more in favour of raising interest rates
than chair Janet Yellen helped the dollar into positive territory
against the euro.
But the yen remained in bullish form, down less than 0.1 percent
against the dollar at 110.43 yen <JPY=> and still within striking
distance of 109.92, its lowest level since October 2014.
Japanese Prime Minister Shinzo Abe told the Wall Street Journal that
countries should avoid seeking to weaken their currencies with
"Naturally the market is focussed on the potential for
intervention," said Kamal Sharma, a strategist with Bank of America
Merrill Lynch in London.
"The comments we are seeing are part of a well-worn path that Japan
has taken in the past. For now, it will be talk rather than actual
intervention. Our view is that intervention will be more justifiable
between 100 and 105, which is our ultimate downside risk for the
Another round of nerves over growth and the health of the big global
banks has driven more falls for stock markets this week, driving
money into the perceived security of the yen.
The Japanese currency has gained 8 percent against the dollar since
Jan. 1 and just under 4 percent against the euro, undermining one of
the main pillars of "Abenomics".
Japan's chief government spokesmen followed Abe's comments by saying
that Tokyo was watching the currency market closely and would
respond "as appropriate". But bankers believe Japan is hamstrung in
what it can do in the run-up to G7 meetings in May.
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"It's quite difficult for the Japanese government to resort to
measures directly aiming at reversing yen strength, like FX
interventions or BOJ's additional easing," wrote Osamu Takashima,
head of FX strategy at Citigroup Securities in Tokyo.
"What the Japanese government can do at present is just to proceed
with the organisation of the fiscal stimulus package."
A big part of the yen's gains, as well, have been driven by the
fading of expectations for rises in U.S. interest rates this year.
Those are now down to a minimum, however, and the latest economic
numbers out of the U.S. this week have been more bullish.
"The dollar has suffered from the lack of growth acceleration and
the Fed re-re-rethink, but there's a lack of interesting
alternatives, at least among the G10 currencies," Societe Generale
analyst Kit Juckes said.
"The US is still out-performing, the Fed is still likely to tighten
before the others and so the dollar rally seems more stalled than
(Editing by Tom Heneghan)
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