TOKYO: The yen clawed back some lost ground Wednesday after it slid on Japanese officials' repeated warnings that they could intervene in currency markets to bring down the surging unit.
Having soared to 18-month highs against the dollar, the yen this week suffered its biggest two-day slide in several months.
The drop came as Japanese finance minister Taro Aso repeated warnings Tuesday about possible action, after saying a day earlier that Tokyo was "prepared to intervene" in markets.
That followed recent similar comments from Prime Minister Shinzo Abe, who warned over the negative impact of a stronger yen on Japanese firms, in what appeared to be a bid to talk down the currency.
But, on Wednesday, the dollar eased back to 108.83 yen from 109.27 yen Tuesday in New York, while the euro slipped to 123.90 yen against 124.27 yen. It was nearly flat at $1.1383 against $1.1387.
"The yen's short-term direction is towards 110 to the dollar but that move is temporarily stalled," Kengo Suzuki, chief currency strategist at Mizuho Securities, told Bloomberg News.
"The yen has fallen most of the days this month. It's natural to see some adjustments."
There have also been growing doubts about whether Tokyo would follow through on its intervention threats as Japan prepares to host a G7 meeting later this month.
A unilateral move would be diplomatically tricky as it could be seen as breaching an earlier G20 agreement not to engage in competitive currency devaluations.
Japan last intervened in currency markets around November 2011, when it tried to stem the yen's rise against the dollar to keep an economic recovery on track after the quake-tsunami disaster earlier that year.
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