FOREX-Dollar falls to 8-month low vs yen, pound sinks

* USD extends losses vs yen as stop-losses triggered

* Long pound/yen position being unwound

* Fujii says recent dlr/yen move "not abnormal" - media

By Satomi Noguchi

TOKYO, Sept 28 (Reuters) - The U.S. dollar fell to its lowest in eight months against the yen on Monday, as investors unwound short yen positions and as expectations that Japan will intervene at these levels receded.

The dollar dropped to as low as 88.23 yen JPY=, its weakest since late January when it hit a 13-year low of 87.10 yen.

Japanese Finance Minister Hirohisa Fujii said that recent movements in the U.S. dollar/yen exchange rate are "not abnormal", Dow Jones Newswires quoted him as saying early on Monday. [ID:nTFD006383]

The report came after Fujii said he was opposed to deliberately weakening the yen or any other currency in a meeting with U.S. Treasury Secretary Timothy Geithner, strengthening views that Japan is unlikely to intervene in currency markets. [ID:nN25518058].

"Much of the current yen rise is based on speculative buying. But many in the market don't believe the Japanese authorities will take action at these levels, because currency intervention has recently been seen as part of protectionist action which authorities probably think needs to be avoided," said a senior trader for a Japanese brokerage firm.

The trader said the market will need to see dollar/yen falling below 87.10 yen at least to seriously consider the possibility of intervention.

Japan has intervened in the currency market in the past to weaken the yen as this helped keep its competitive advantage in global trade.

Large margin calls on the pound/yen GBPJPY=R longs have also been behind the yen buying. The pound GBP=D4 fell sharply to $1.5770, its lowest since late May, breaking below support for sterling at around $1.5800. It was hammered against the yen, falling 1.6 percent and briefly dropping below the 140 yen mark, its lowest since late April.

The pound has been under pressure after Bank of England Governor Mervyn King said last week that a weak pound would help exports and the UK economy.

"Continued speculation that they will not intervene has led to capitulation of short-yen positions, led by the sterling/yen cross," said Sue Trinh, senior currency strategist at RBC Capital Markets.

The latest data from the Commodity Futures Trading Commission showed net short positions in the pound more than doubled to 31,595 contracts in the week to Sept. 22 from 12,487 a week earlier. Long positions on the yen rose to a net 45,615 contracts from 37,107. [IMM/FX].

The euro fell 0.4 percent from late on Friday in New York to $1.4631 EUR=, dragged down by its fall against the yen and cutting gains against the dollar made on Friday after date showed U.S. consumer sentiment hit its highest level this month since January 2008. [ID:nN25501082].

Against the yen, the euro EURJPY=R fell as low as 129.84 yen on EBS, as euro long positions versus the yen were unwound below 130 yen mark traders said.

The Australian dollar AUD=D4 fell 0.7 percent to $0.8622 and dropped 1 percent to 76.72 yen AUDJPY=R.

(Additional reporting by Anirban Nag in Sydney; Editing by Joseph Radford)