Yen falls in Tokyo

The dollar fought its way higher on the yen on Friday following a report Japan's prime minister and the head of its central bank would meet to discuss ways to deal with the Japanese currency's export-sapping strength. The greenback clawed its way to 86.08 yen, up 0.2 percent from late US trading on Thursday, though traders reported tough resistance ahead of stops at 86.30/50.
The latest lurch higher came after the Asahi Shimbun reported Japanese Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa may meet as early as next week to discuss the yen's strength and possible responses. A government source later confirmed that the government and the BoJ are co-ordinating to set up such a meeting.
Speculation has been intense that authorities would finally act on the yen given its strength was hitting stocks and exports. The BoJ confirmed it had checked forex rates on Thursday but emphasised it had no levels in mind. In the wake of the yen's rise to a 15-year high against the dollar of 84.72 yen earlier this week on trading platform EBS, market players say the chances of yen-selling intervention at some point cannot be ruled out.
The focus now is on what kind of specific measures the government or the BoJ may come up with to curb yen strength. Judging from what happened in late November to early December, there is a chance that any extra monetary easing steps that the Bank of Japan may be mulling could be unveiled before the possible meeting between Kan and Shirakawa, said Masafumi Yamamoto, chief FX strategist Japan for Barclays Capital.
"I think there will be a lot of disappointment if any monetary easing steps by the Bank of Japan are viewed as being ineffective," Yamamoto said. Market players say Japanese authorities seem unlikely to intervene unless the dollar drops below 85.00 yen and gets closer to its record low of 79.75 yen hit in 1995, or the greenback's drop against the yen becomes more volatile.
The euro edged up 0.2 percent to $1.2855, with support lower down at its 100-day moving average at $1.2803. Traders felt it could hold in a $1.2762/1.2897 area for now with the risk of a short-squeeze into eurozone growth data due later. The dollar index, a gauge of the greenback's performance against six major currencies, was down 0.2 percent at 82.481, after rising 0.4 percent on Thursday.
On the week, it has risen 2.6 percent as worries about the global economy prompt investors to cut positions in risky assets and cover short dollar positions. The index has resistance at 83.451, its July 21 high, while support is seen around the previous day's low of 82.109, and 81.96.