* Yen rallies but rebound may be temporary
* Aso's comments, doubts over radical BoJ chief helps yen
* Swings in currency rates impacting volatility
* Draghi's comments continue to weigh on euro
By Julie Haviv
NEW YORK, Feb 8 The yen skyrocketed against the
euro and dollar on Friday after Japan's finance minister said
the currency has recently weakened too quickly, raising doubts
about whether the next governor of the Bank of Japan will ease
The yen, which fell to its lowest against the euro since
April 2010 and its lowest against the dollar since May 2010 on
Wednesday, got a boost from Finance Minister Taro Aso's comments
that the yen's slide from 78 to 90 per dollar was steeper than
It was also helped by a Reuters report that Japanese Prime
Minister Shinzo Abe faces opposition from within his own cabinet
and financial bureaucrats to appointing a new BoJ governor who
will pursue aggressive easing policies.
"Watching BoJ candidates is key for dollar/yen leading into
March," said Camilla Sutton, chief currency strategist at
Scotiabank in Toronto.
A new governor who supports the purchases of foreign bonds
would be the most negative choice for the yen, she said.
"We hold a relatively modest year-end dollar/yen forecast of
95," she said.
The euro fell as low as 123.40 yen, before paring losses to
last trade down 1.2 percent on the day at 123.92 yen.
The dollar last traded at 92.78 yen, down 0.9 percent
on the day, according to Reuters data. It earlier hit a low of
At current prices, the dollar has gained against the yen for
13 straight weeks.
The euro, meanwhile, continued to be weighed by comments
that European Central Bank chief Mario Draghi made on Thursday.
Draghi said the exchange rate is important for growth and
price stability, which investors perceived as a sign the bank is
concerned with the common currency's recent advance and
potentially could act to stem its strength.
"Central bank and government officials from around the world
have given FX markets the gift of volatility this year," said
Win Thin, senior currency strategist at Brown Brothers Harriman
in New York. "Yesterday, it was ECB President Draghi's second
press conference in a row that caught markets by surprise.
Today, it was Japan Finance Minister Aso's turn, as he
apparently told reporters that the recent pace of yen weakness
has been too fast."
Earlier this month, BoJ governor Masaaki Shirakawa said he
will step down on March 19, weeks ahead of schedule, allowing
Abe to appoint a chief who is more amenable to making drastic
policy changes to get Japan out of deflation.
Expectations that the BoJ will aggressively ease monetary
policy have driven the yen lower in recent months.
Some strategists said gains were likely to be temporary
after Japanese balance of payments data added to worries about
the economy. Japan posted a current account deficit for the
second month running in December.
Meanwhile, sudden swings in currency rates are refiring
measures of future global markets volatility, pushing these risk
gauges back towards what some will see as more realistic and
even healthier levels.
The euro last traded at $1.3362, down 0.3 percent on
the day, with the session trough of $1.3352, the lowest since
Draghi also said economic activity in the euro area should
recover gradually in 2013 but added there are more negative
risks than positive, and said the exchange rate was important
for growth and stability.
Investors interpreted the remarks as setting the scene for a
possible future interest rate cut by the ECB, in the event that
the euro zone economy slows further.
At the moment the ECB is still withdrawing some of its
unconventional policy easing at a time when both the Federal
Reserve and the BoJ are expanding their balance sheets.
The euro, at current prices, is down about 2.03 percent
against the dollar this week, the worst week since July 8,
according to Reuters data.