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 The yen surged at one point by as much as 2 percent against the
dollar on Thursday, and Minister Taro Aso responded early on Friday
by warning rapid currency moves were "undesirable," that the yen's
were "one-sided" and that Japan would take steps as needed.
That is language that Tokyo has used in the past to flag
intervention, and the yen's run to 17-month highs against the dollar
has required investors to believe that it would hold fire at least
until after next week's G20 meetings in Washington.
"Of course there is some fear in the market," said Manuel Oliveri, a
strategist at Credit Agricole in London.
"But one has to bear in mind that there is the G20 agreement not to,
and that to work any intervention would need to be large and really
that means it would need the support of the Fed and the European
Central Bank."
By 0738 GMT, the yen had lost 0.7 percent at 108.92 yen per dollar,
still up more than 2 percent on the week and around 10 percent on
the year so far.
The dollar was higher across the board <.DXY> after taking some
comfort from Federal Reserve Chair Janet Yellen's promise on
Thursday that the U.S. central bank was on course to tighten rates
gradually going forward.
Yellen's statement last week that the Fed should proceed cautiously
in light of looming global risks to the U.S. economy have been at
the heart of sharp falls over the past 10 days for the dollar
against the euro and yen.
Both of those currencies have been treated as safe havens by
investors sharing growing concerns that much of the developed world
is falling into a debilitating cycle of deflation that central banks
are powerless to stop.
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The dollar inched up 0.1 percent to $1.1380 per euro in early
European trade.
"This is really just a bit of Friday respite," said a dealer with
one international bank in London. "Where we go next week seems set
to depend on risk appetite again. As long as stocks are falling, the
dollar will be a sell on any rallies."
A Reuters poll of strategists released on Thursday showed the
broader dollar rally that began in mid-2014 has nearly run its
course and will only gain slightly over the coming year, with
respondents saying risks to their forecasts are tilted more to the
downside.
"We think a combination of falling US real rates and elevated market
volatility are weighing on the dollar against the current account
surplus-backed euro and yen," analysts from BNP Paribas said in a
note.
"(But) we remain constructive on the dollar against the Australian
and Canadian dollars."
(Editing by Keith Weir)
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