FOREX-Yen rises as disappointing Japan GDP dents risk sentiment
* Japan's Q2 annualised GDP +2.6 pct, below expectations
* Yen pushes higher after the disappointing GDP data
* But yen's rise slowed by dollar bids near 96 yen -trader
By Masayuki Kitano
SINGAPORE, Aug 12 - The yen edged higher on Monday after data showed Japan's economy grew at a slower-than-expected pace in the second-quarter, prompting investors to sell Tokyo shares and trim their exposure to risk.
The dollar fell to a low of 95.97 yen, nearing a seven-week trough of 95.81 yen set last Thursday, and was below the 96.38 yen level just before Japan's data was released.
It last stood at 96.14 yen, down 0.1 percent on the day.
The euro touched a six-week low of 127.97 yen and was last down 0.2 percent at about 128.12 yen.
Japan's economy grew an annualised 2.6 percent in April-June, a third straight quarter of expansion but slower than expected.
The weaker-than-expected growth data could further buoy the yen if Tokyo shares continue to weaken, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
"If share prices slide, the 95 yen level (for the dollar) is right around the corner," Okagawa said.
The yen has shown a strong inverse correlation to Japanese shares in recent weeks and market players noted that speculators have taken recent sharp falls in the Nikkei as a signal to buy the currency.
The yen, a traditional safe haven currency, usually attracts good buying interest in times of market stress.
Dollar buying interest at levels below 96.00 yen may support the greenback versus the yen in the near term, said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore.
"We filled a lot of bids in dollar/yen...each side of 96.00 and the street obviously have them as well," Halley said.
"I still expect dollar/yen to resolve to the downside this week. But for today the street has a definite bias to (dollar) bids in good size under 96.00, so it will be slow going," he added.
Elsewhere, the euro eased 0.1 percent versus the dollar to about $1.3325.
The euro took a brief spill to $1.3313 earlier on Monday after Der Spiegel reported the Bundesbank was warning that Greece would need more financial assistance by early next year.
Against a basket of currencies, the dollar inched up 0.1 percent to 81.182, but was still not far from last week's seven-week trough at 80.868.
"A key focus is on the DXY as the decline approaches the important 80.50/88 support zone," said analysts at JPMorgan. "This area includes the August '11 uptrend line and June low."
"Given the importance of these levels and the oversold and diverging momentum setup, some pause/retracement seems close."
Dealers noted positioning in the market had also become more favourable to consolidation as speculators had pared their bets in favour of the dollar for a third straight week.
The value of the dollar's net long position fell to $21.62 billion in the week ended Aug. 6 from $24.45 billion.