Yen hits 14-year high but no intervention expected

TOKYO (Reuters) - The yen climbed to a 14-year peak against the dollar on Thursday but the market does not believe Japanese authorities will intervene anytime soon because the move reflects broad dollar weakness, not yen strength.

JAPANESE INTERVENTION UNLIKELY

Although the yen has risen on the crosses on Thursday, the market sees the appreciation as a result of the falling dollar and the prospect that U.S. interest rates will stay low for a while.

Traders and analysts think Japan would need cooperation from the United States and Europe if it wanted to step in to buy dollars. This seems unlikely, particularly as the Federal Reserve described the dollar's recent drop as "orderly.

Market participants say the United States has little incentive to intervene when Treasuries continue to draw global funds and it is pressing for global trade to be rebalanced -- something analysts say means the dollar has to weaken.

Japan's Deputy Finance Minister Yoshihiko Noda also believes the moves reflect dollar weakness and told Reuters the Ministry of Finance is not considering intervention.

Officials say they must act appropriately against "abnormal" moves but one-month dollar/yen implied volatility, a measure of expected fluctuations, has jumped. It is still below 16 percent, where it has been since April, which suggests market moves are not disorderly.

INTERVENTION AT SOME STAGE?

The government said this month that Japan has returned to deflation. With the Nikkei share average .N225 underperforming other markets, some analysts say the odds are rising that Japan could alter its "benign neglect" of yen strength and launch policies to deal with the economy.

In trade-weighted terms, the yen has risen much more modestly, as this graphic shows: r.reuters.com/zus63g

Its real effective exchange rate -- a trade-weighted, inflation-adjusted measure of its broad value calculated once a month by the Bank of Japan -- was 117.8 in October, roughly 9 percent below an eight-year high of 128.9 hit in January.

But the yen has started to gain on the Australian and New Zealand dollars, making traders more circumspect about the possibility of intervention further down the line.

WHAT WOULD TRIGGER INTERVENTION?

Speed. If the dollar's fall accelerates against the yen and implied volatility rises above 20 percent -- which would signal a disorderly move -- market players would begin to see a serious chance of coordinated intervention.

Analysts say the market would grow warier of intervention risk if the dollar falls to 85.00 yen, 80.00 yen or its record low of 79.75 yen. But speculators tend to use round figures as targets at which to take profits, which tends to slow the rise.

(Editing by Jan Dahinten)