FOREX-Yen dips but near 15-yr high vs dlr, Japan move eyed

* Market wary of possible BOJ, Japan govt action on yen

* Short-covering, Japanese importer buying supports dollar

* But selling interest seen likely to emerge near Y85.00

* Dollar drop could accelerate if Y83.50 breached

* Dollar burdened by sliding yields, talk of Fed easing

By Kaori Kaneko

TOKYO, Aug 25 (Reuters) - The yen pulled back from 15-year highs on the dollar and a nine-year peak on the euro on Wednesday due to chances that Japanese authorities may take steps such as yen-selling intervention to stem the yen's rise.

The caution initially stemmed from a Nikkei business daily report saying Japan's Ministry of Finance may consider unilateral yen-selling market intervention if speculators drive up the currency. [ID:nN24264334]

Finance Minister Yoshihiko Noda reinforced that view, telling reporters on Wednesday that recent yen moves were one-sided and Tokyo will respond appropriately when necessary. [ID:nTKU106216]

The yen's surge has also nudged up the previously negligible chances of monetary easing by the Bank of Japan before its Sept. 6-7 rate review, sources told Reuters. The most likely step would be to expand the amount or extend the duration of a short-term funding operation. [ID:nTOE67N07Z]

Japanese Prime Minister Naoto Kan said he feels a sense of crisis over the strong yen and wants to show a firm response soon, Jiji news agency reported on Wednesday. [ID:nTKU106217] But Noda said he had not received any specific instructions from the prime minister on currency issues. [ID:nTKU106219]

Traders were also closely watching the Nikkei average .N225, which fell over 2 percent to a 16-month low, calculating that the steeper its losses the more possible it is that Japanese authorities might finally bite the bullet and intervene.

"Combining the Nikkei's report, and comments from the prime minister and finance minister, the market view on the possibility of Japan's intervention if the yen appreciates further has been raised," said Tomohiro Nishida, treasury deparment manager at Chuo Mitsui Trust and Banking.

"But it's a question of whether Japan will intervene at the current forex level."

The dollar rose 0.4 percent against the yen to 84.25 yen JPY= on short-covering, having pulled up from a 15-year low of 83.58 yen hit on trading platform EBS on Tuesday. There was also some talk of dollar-buying by Japanese importers.

Traders said, however, that the dollar's gains were likely to be limited with selling interest seen likely to emerge if it rises toward 85.00 yen.

Some were sceptical about just how effective any intervention by Japan alone would be.

"The bottom line is that it will be difficult to reverse the yen's firm trend completely even with monetary easing by the BOJ, which the market has priced in, along with solo intervention by Japan," said Jun Kato, senior manager of investment at Shinkin Asset Management.

"Such moves by the Japanese authorities might weaken the yen temporarily but there are market players who are waiting to sell the dollar on its rise. There's a possibility the yen may strengthen even more."

Traders said the dollar's fall could accelerate if it drops below 83.50 yen, at which the greenback had strong support in June 1995 after hitting its all-time low of 79.75 yen in April of that year. There is talk of option barriers on the downside at levels such as 83.00 yen, they said.

The euro climbed 0.5 percent to 106.52 yen EURJPY=R after touching a nine-year low of 105.44 yen on EBS on Tuesday.

But the market mood is still one of yen buying as the latest dismal U.S. home sales data and a renewed slide in stocks has sent investors scrambling for safe-havens.

Japanese retail margin traders' combined net long position in dollar/yen and six cross/yen pairs swelled to 508,101 contracts as of Tuesday, the highest on data going back to July 2006, according to Tokyo Financial Exchange data.

An analyst at an FX trading firm says many retail investors strongly believe the Japanese authorities will step into the market, prompting them to bet against the Japanese currency.

The euro's upside was limited after Standard & Poor's downgraded Ireland to AA- and warned the outlook was still negative, fanning worries about euro zone sovereign debt and the banking system. [ID:nN24275188].

The euro inched up 0.1 percent to $1.2643 EUR= after touching a 6-week low of $1.2588 on EBS on Tuesday.

The single currency fared less well against the Swiss franc, collapsing to a record low around 1.3015 francs EURCHF= before edging back to 1.3032 francs, down 0.1 percent on the day.

A 27 percent drop in existing U.S. home sales [ID:nN24249810] caused much of the damage, knocking the S&P 500 .SPX down 1.5 percent and sending Treasury yields to new lows [US/].

The data was so bad it sparked talk that the Federal Reserve could embark on a fresh round of quantitative easing, which seemed to tarnish the U.S. dollar's claim to be a safe haven. (Additional reporting by Wayne Cole in Sydney and Masayuki Kitano and Rika Otsuka in Tokyo; Editing by Joseph Radford)