FOREX-Yen near 15-year peak after BOJ move fizzles

* Yen firm, seen testing Japan’s willingness to intervene

* Dwindling U.S.-Japan yield gap seen hurting dollar

* Euro hits record low against Swiss franc

* Aussie rises on strong retail sales data

By Hideyuki Sano

TOKYO, Aug 31 (BestGrowthStock) – The yen clung near a 15-year high
against the dollar on Tuesday as traders looked to test Japanese
authorities’ resolve on intervention after the Bank of Japan’s
easing steps the previous day failed to scare investors from
betting on it rising further.

With mounting U.S. economic worries seen keeping investors
shunning risk assets such as high-yielding currencies, the market
is likely to push up the low-yielding yen, which could eventually
prompt Japan to sell the yen in currency markets for the first
time in more than six years.

“Will they intervene today? No. But markets will become more
nervous if the yen approaches 80 yen,” said Etsuko Yamashita,
chief economist at Sumitomo Mitsui Banking Corp.

“If a raft of U.S. economic data due this week pushes the yen
higher, Japan may indeed to intervene,” she said. On top of
closely-watched jobs numbers on Friday, there is housing price
data on Tuesday and manufacturing on Wednesday.

Japanese Finance Minister Yoshihiko Noda repeated on Tuesday
that the government would take decisive action on currencies —
usually seen as a code for intervention — when necessary.

But reaction in the market was limited.

The dollar slipped about 0.3 percent to 84.40 yen (JPY=: ),
edging near the 15-year low of 83.58 hit last week. It fell 0.7
percent on Monday as investors took profits after the Bank of
Japan announced its decision to expand a cheap funding programme.

The yen showed no reaction to a series of Japanese data,
including better-than-expected readings in industrial output and
retail sales.

As the dollar/yen has had a strong correlation with the yield
gap between the United States and Japan in recent months, a sharp
fall in U.S. Treasuries on Monday also weighed on the dollar.

U.S. Treasuries prices jumped on Monday, with 30-year bond
prices rising two full points, recovering from a sharp sell-off
on Friday.

In addition, the yen could face potential buyback pressure in
cross-yen trades, such as the euro/yen and the Aussie/yen, which
have attracted some appetite because of their larger yield
differentials.

“If share prices fail to rise, that could lead to selling in
the cross yen, which would put pressure on the dollar/yen,” said
Nobuhiko Akai, senior manager of forex trading at Bank of
Tokyo-Mitsubishi UFJ.

“The dollar/yen might test the previous low (of 83.58 hit
last week) by the end of this week,” Akai said.

In another sign of investor risk aversion, the euro slumped
to a record low against the safe-haven Swiss franc on big selling
from emerging market players.

The euro dropped fell 0.4 percent to as low as 1.2934 franc
(EURCHF=R: ), down 0.4 percent on the day.

The euro slid 0.3 percent against the yen to 106.80 yen
(EURJPY=R: ), breaking below 107 yen, which had been support for
the past few sessions.

Against the dollar, the euro fell (Read more about the trembling euro. ) 0.1 percent to $1.2652
(EUR=: ).

It has some support at around $1.2605, a 50 percent
retracement of the euro’s rally from June to early August, and at
a low of $1.2588 hit a week ago, though a break below these
levels could set off a fresh downward trend.

Some traders say recent rises in spreads of sovereign CDS in
some euro zone countries, such as Ireland and Italy, are
rekindling fears about the euro zone’s debt problems, which
pushed the single currency to a four-year low earlier this year.

The Australian dollar climbed 0.3 percent to $0.8940
(AUD=D4: ), after a strong-than-expected reading in Australian
retail sales. [ID:nSGE67U01M]
(Additional contribution from Reuters Analyst Rick Lloyd in
Sydney; Editing by Joseph Radford)

FOREX-Yen near 15-year peak after BOJ move fizzles