The dollar jumped more than two yen from a 15-year low after Japan intervened to sell yen for the first time in six years, but with key chart levels yet to break, traders were sceptical the impact would be lasting. The intervention helped send the euro, Australian dollar and sterling sharply higher on the day against the Japanese currency, although traders doubted Japan had bought anything other than dollars for yen.
Estimates on how much yen selling Japan had done in Asia varied widely. Dealers cited talk of 300-500 billion yen ($3.6 billion-$6 billion) although some reports put it closer to 100 billion yen. At 0810 GMT, the dollar was up 2.7 percent at 85.40 yen, close to a session high of 85.53 hit on trading platform EBS. The euro was 2.8 percent higher at 110.78 yen after making a brief show into its Ichimoku Cloud, an indicator used to gauge momentum and future areas of support and resistance, at 111.01.
Some stop-losses were reported at 85.75, but technical analysts said the focus remained on the downside while dollar/yen held below key resistance at 86.40, which is the bottom of the closely watched Ichimoku Cloud. The Bank of Japan started buying the dollar from around 10:30 am (0130 GMT) on Wednesday. The yen gained fresh momentum on Tuesday after Japanese Prime Minister Naoto Kan won a leadership ballot against a rival seen as more willing to intervene to weaken the currency.
The dollar was also hurt early on by talk, ahead of a policy meeting next week, that the Federal Reserve could be nearing more quantitative easing . The dollar was flat against the euro at $1.2995. The Australian dollar shot to its highest in nearly three months at 79.98 yen.
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