CORRECTED-FOREX-Yen resumes slide, G7 concerns soothed for now

Wed Feb 13, 2013 8:03am EST

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(Corrects headline to "resumes slide")

* 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

By Anooja Debnath

LONDON, Feb 13 (Reuters) - The yen fell on Wednesday, giving up earlier gains as investors shrugged off comments by a Group of Seven official the previous day, citing concerns about the yen's excessive weakness.

Yen sellers were encouraged by comments from Russian Deputy Finance Minister Sergei Storchak, who said the yen had definitely been overvalued and that "there are no signs" Japan's monetary authorities were intervening.

The euro rose 0.3 percent to 126.10 yen, edging towards the 34-month high of 127.71 hit last week.

The dollar was up flat on the day at 93.48 yen. U.S. investors were cited as the main buyers of the pair. It hit a near three-year high of 94.465 yen on Monday.

In their statement on Tuesday, G7 finance chiefs reaffirmed that fiscal and monetary policies would not be directed at devaluing currencies.

But the yen leapt in volatile trade after a G7 official later said the G7 statement was in fact meant to signal worries about excessive moves in the yen.

By Wednesday, 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.

"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.

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.

"The yen crosses will come lower ahead of the weekend, mostly because it's an excuse to take profit, given how far we have come," said Geoff Kendrick, FX strategist at Nomura, referring to the euro's 10 percent gain versus the yen in 2013.

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.

EURO RISES VS DOLLAR

The euro rose 0.3 percent to $1.3490, with traders citing demand from Middle East buyers earlier in the day.

Some strategists said the euro 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 single currency fell 1 percent on the day to a 4-1/2 month low versus the Swedish crown of 8.4655 crowns.

The crown rose after the Riksbank left rates on hold, wrongfooting some investors who had positioned for a cut, and central bank governor Stefan Ingves said the strength of the currency was not a problem. (Additional reporting by Nia Williams, editing by Nigel Stephenson)

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