Dollar gains on yen

The dollar rose against the yen on Tuesday as its rebound from an eight-month low prompted investors to trim short positions and after Japan's finance minister said intervention was possible in extreme cases. After backtracking on Monday from remarks suggesting he was comfortable with recent yen strength, Finance Minister Hirohisa Fujii spoke again, saying he would not rule out taking action if currency moves were irregular but that not promoting a weak currency was the correct policy.
The yen, already on the backfoot early after automatic dollar buy orders were triggered around 89.80 yen per dollar, weakened past 90.00 yen but later edged off its lows and analysts said his comments did not mean Japan's forex policy had changed. "I don't think Fujii's previous remarks about the government's discretion towards intervention were a sign of a big shift in the government's currency policy as Japan has not intervened in the market for five years," said Osamu Takashima, chief currency analyst at Bank of Tokyo-Mitsubishi UFJ.
The yen had hit an eight-month high of 88.23 per dollar on trading platform EBS on Monday but retreated the same day as Fujii toned down comments that recent dollar/yen moves were not "abnormal". Japan has not intervened in the currency markets since 2004 and many market players doubt the new government, led by the Democratic Party which won elections last month, will depart from the old administration's stance.
Traders and analysts say the dollar would have to fall to January's 13-year low of 87.10 yen to make the market think seriously about the possibility of intervention but many say a drop through 85 yen would more likely be needed. The greenback rose 0.4 percent from late New York levels to 89.97 yen, after forging a high for the day at 90.23. However, it is down about 3 percent this month.
The euro also gained on the yen, rising 0.5 percent to 131.68 after dipping to a two-month low of 129.84 on EBS on Monday. Sterling, which hit a five-month trough of 139.70 yen the previous day, rose 0.8 percent to 143.52 yen. The Australian dollar gained on the US dollar on Monday and held its ground at $0.8756, not far below a 13-month high of $0.8790 set last week. The euro edged up 0.2 percent to $1.4645, while the battered pound rose 0.5 percent to $1.5958 after hitting a four-month low of $1.5770 on Monday. The dollar index slipped 0.3 percent to 76.802.