FOREX-Yen dips; market wary of possible Japan action

* Yen dips on wariness about whether Japan will take action

* Japan PM: will take firm action on currencies if needed

* Traders await Bernanke’s speech, U.S. GDP data

(Updates prices, adds quote, details)

By Jessica Mortimer

LONDON, Aug 27 (BestGrowthStock) – The yen dipped against the dollar
and the euro on Friday as wary nervous speculators trimmed long
positions and Japan’s prime minister reiterated a threat to take
steps to stem the currency’s steady rise.

Prime Minister Naoto Kan said he would take firm action on
currencies when needed and that he would meet Bank of Japan
Governor Masaaki Shirakawa when the central bank chief returns
from an overseas trip. [ID:nTKZ006504]

The yen stayed in negative territory but did not extend
losses after the comments. Analysts and traders said Kan seemed
to play down the prospect of imminent action but they remained
wary with the currency so close to 15-year highs versus the
dollar.

Caution ahead of a speech by Federal Reserve chairman Ben
Bernanke at the Fed’s annual retreat in Jackson Hole at 1400 GMT
and U.S. gross domestic product data at 1230 GMT also kept major
currency pairs within tight ranges.

“There doesn’t seem to be any urgency to take action and
Kan’s comments will do little to stop dollar/yen moving lower,”
said BNP Paribas currency strategist Ian Stannard.

At 0916 GMT, the dollar was up 0.3 percent against the yen
(JPY=: ) at 84.72, pulling off an intraday low of 84.27 yen as
traders said an earlier media report that Kan was to hold a news
conference sparked profit-taking in dollar/yen short positions.

But the pair stayed close to a 15-year low of 83.58 yen hit
on trading platform EBS earlier this week and still below 85.00
yen, which had been seen as a level of concern for Japanese
authorities. The euro (EURJPY=R: ) rose 0.3 percent to 107.72 yen.

“We have had such a strong move followed by more and more
talk about possible intervention risk that it is natural people
would want to trim long positions,” said Anders Soderberg,
currency strategist at SEB in Stockholm.

The euro was steady against the dollar at $1.2716 (EUR=: ),
off a six-week low of $1.2588 hit earlier this week when it was
hit by concerns about the health of some euro zone countries.

Traders said the euro held within a tight range ahead of
U.S. GDP data and Bernanke’s speech. They cited bids around
$1.2690, capped by offers around $1.2750.

The Fed announced plans earlier this month to boost a
flagging economy by reinvesting money from maturing mortgage
bonds in government debt and investors will look for clues on
possible further moves.

SEB’s Soderberg said the market was priced for a downward
revision to U.S. GDP after recent weak data. A particularly weak
number may cause knee-jerk dollar falls but this would probably
be short-lived if global equities fell in response, prompting
investors to seek the safety of the greenback, he said.

RECORD PEAK

Despite the risk of possible action by Japanese authorities
to curb yen strength such as yen-selling intervention or
monetary easing by the Bank of Japan, some traders and investors
say the yen could test a record high of 79.75 yen to the dollar,
hit in April 1995, later this year.

The fate of the yen will depend on the overall trend of the
U.S. economy rather than the possibility of Bank of Japan
intervention, Michiharu Maeda, general manager of Dai-ichi’s
separate account management division told Reuters in an
interview on Thursday.

“We believe that there is a big chance of the BOJ
intervening by itself … but the impact could be limited as the
central bank’s efforts could result in creating more chances for
the market to sell (the dollar against the yen),” Maeda said.

A euro zone source familiar with the situation said on
Thursday that joint central bank intervention to stem the rise
of the yen was not likely. [ID:nLDE67P16B]
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ PDF on Japan's yen puzzle: http://r.reuters.com/nef47n Q+A-Will Japan intervene to curb yen's rise? [ID:nTOE67O07Q] BOJ FOCUS on chance of monetary easing [ID:nTOE67N07Z] Why the yen may remain strong [ID:nTOE67B078] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

(Additional reporting by Masayuki Kitano in Tokyo)

FOREX-Yen dips; market wary of possible Japan action