FOREX-Yen resumes slump as G7 concerns subside ahead of G20 meeting
* Yen falls after short-lived rebound
* BoE's King and Russian official's comments lifts dollar/yen
* Investors likely to be wary ahead of G20 meeting
* BOJ policy meeting ends on Thursday
* U.S. retail sales in January barely rose
By Julie Haviv
NEW YORK, Feb 13 (Reuters) - The yen dropped against the dollar and euro in volatile trade on Wednesday, returning to its months-long trajectory, as remarks from Russia's deputy finance minister gave investors the green light to start selling the Japanese currency again.
Russian Deputy Finance Minister Sergei Storchak said the yen had definitely been overvalued and that "there are no signs" Japan's monetary authorities were intervening.
The Group of Seven on Tuesday issued a statement reaffirming that fiscal and monetary policies would not be directed at devaluing currencies. The yen had rallied after a G7 official said their statement was meant to signal worries about excessive moves in the yen.
By Wednesday, however, investors were more confident the G7 statement was not meant to warn about recent yen weakness. That sentiment was reinforced by comments from Bank of England Governor Mervyn King, who said the statement designed to cool international currency tensions should be taken at face value.
"The G7 statement on exchange rates has potentially removed some of the downside momentum from the Japanese currency," said Nick Bennenbroek, head of currency strategy, at Wells Fargo in New York.
"Although foreign currencies are up today, those moves are somewhat lacking in conviction, with markets still in something of a waiting mode ahead of this weekend's G20 meeting of financial officials," he said.
Some strategists said investors may still be wary of selling the yen before a G20 meeting in Moscow on Friday and Saturday. If policymakers caution against the pace of the yen's recent falls, the Japanese currency could rebound.
"Further foreign currency gains are possible, though perhaps not until after and depending on the outcome of that meeting," Bennenbroek said.
The euro last traded at 126.04 yen, up 0.2 percent on the day and edging towards a 34-month high of 127.71 hit last week.
The dollar last traded at 93.54 yen, up 0.1 percent on the day. U.S. investors were cited as the main buyers of the pair. It hit a near three-year high of 94.42 yen on Monday.
"To me the statement says -- as long as price action is smooth (G7 officials) are not going to do anything. So I stand by my point that we are going to have more yen weakness in the medium-term," ," said Vasileios Gkionakis, head of global FX strategy at UniCredit in London.
He said Unicredit would maintain its long euro/yen position and target 130.00 yen in three to six months.
The yen lost nearly 20 percent against the dollar between November and early February, picking up speed as Japan's new government put pressure on the Bank of Japan to ease monetary policy more aggressively to defeat deflation.
Markets were also likely to tread cautiously until the outcome of a BOJ meeting ending on Thursday, although many expect the bank to hold off from any fresh easing measures until a new governor takes the helm.
The dollar briefly pared gains against the yen after U.S. data showed retail sales barely rose in January as tax increases and higher gasoline prices restrained spending.
EURO RISES VS DOLLAR
The euro rose 0.2 percent to $1.3482, with traders citing demand from Middle East buyers earlier in the day.
Some strategists said the euro also would be largely sidelined before the G20 meeting, although it could come under pressure if euro zone gross domestic product data on Friday shows the economy contracting.
The euro has retreated from a 15-month high of $1.3711 hit at the start of February. It extended losses last week when European Central Bank President Mario Draghi warned of downside risks to the euro zone growth outlook.
The British pound, meanwhile, fell to multi-month lows following a Bank of England inflation report that highlighted a weak pound is a necessary condition for rebalancing, strategists said, and confirmed official expectations that price pressures will remain above target.