* G7 official said statement intended to signal concern on yen moves
* Statement on currencies initially cools currency war talk
* G7 reaffirms commitment to market-determined exchange rates
* ECB Draghi said no such thing as a currency war
By Julie Haviv
NEW YORK, Feb 12 The yen rallied against the dollar and euro on Tuesday, rebounding from recent multi-year lows, after a Group of Seven countries official said a statement was meant to express concern about excessive movements in the Japanese yen.
The statement from the Group of Seven rich nations also was meant to signal concern over statements from Tokyo about the levels of the Japanese currency, a G7 official said.
The yen has been volatile over the past day depending on how markets have been interpreting the position of the G7 nations.
"The G7 statement was misinterpreted. The G7 statement signaled concern about excess moves in the yen," the official said on Tuesday. "The G7 is concerned about unilateral guidance on the yen. Japan will be in the spotlight at the G20 in Moscow this weekend."
The official was referring to a meeting of the Group of 20 finance ministers in Moscow this Friday and Saturday.
The statement from the G7 official ran counter to the way markets had been interpreting the position. The G7 said it remained committed to market-determined exchange rates and that fiscal and monetary policies must not be directed at devaluing currencies.
Japan interpreted the G7 currency statement as giving it a green light to continue efforts to reflate its economy, and the yen initially fell following the currency statement.
"The initial statement was interpreted as benign for the yen and in this clarification they are very clearly singling out Japan's policy," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"This sets us up for a very interesting G20 meeting later in the week," he said. "But, the scope for a major shift in policy as a result of statements is very limited, especially with the U.S., U.K. and Japan actively participating in currency devaluation."
The dollar last traded at 93.58 yen, down 0.8 percent on the day, according to Reuters data. The high of 94.42 yen on Monday was its strongest since May 2010. The dollar has risen 7.9 percent against the yen so far this year.
"Statements and actions are two different things, so how actionable these statements are is a question mark," Esiner said.
The euro last traded at 125.28 yen, down 0.9 percent on the day. On Feb. 6 it hit a near three-year high of 127.71 yen.
The common currency has risen about 9.5 percent against the yen, leading to strong protests from some European leaders that a strong euro would hurt a fragile economic recovery.
Strategists said the yen's weakness, driven by the new Japanese government's demands for aggressive easing of monetary policy to beat deflation, would persist and investors would buy the dollar and the euro on dips, making any yen rebound short-lived.
The Group of Seven countries initial statement was seen as giving the market a green light to drive the Japanese currency even lower.
"The G7 statement was nothing unexpected. Policy actions speak louder than words and what we are seeing is that Japan, Switzerland, the UK are all looking to print money," said Adam Myers, European Head of FX Strategy at Credit Agricole in London.
The euro last traded at $1.3442, up 0.3 percent on the day, with gains accelerating after comments from European Central Bank President Mario Draghi.
Draghi said there is no such thing as a currency war and exchange rates are as important for growth as for price stability. He also said Spain was on the right track towards economic recovery.
Concerns about a bailout for Cyprus, about a Spanish political scandal and about Italy in the run-up to Feb. 24-25 elections are likely to check gains in the euro.
"We stick to our cautious euro view, in particular against the dollar and ahead of Italian elections at the end of this month," Credit Agricole's Myers said.