* Japan's Aso says not considering foreign bond purchases
* German ZEW unexpectedly soars to highest since April 2010
* Euro gains prove short-lived, Italy election worries weigh
By Wanfeng Zhou
NEW YORK, Feb 19 The yen rose against the dollar
and euro on Tuesday as disagreement between Japanese officials
raised doubts over how aggressively Japan will ease its monetary
Japanese Finance Minister Taro Aso said on Tuesday he was
not considering buying foreign bonds as part of efforts to ease
monetary policy, a day after Prime Minister Shinzo Abe said this
was an option.
Expectations Japan will take further stimulative steps to
fight deflation have driven the dollar up 8 percent versus the
yen so far this year. But the pace of the yen's fall has slowed
lately as investors waited to see if words will translate into
"The comments suggested that there may be growing
differences between the prime minister and the finance minister,
which could threaten the pace of policy easing going forward,"
said Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington, D.C.
The dollar fell 0.4 percent to 93.53 yen, hovering
above chart support at 93.38 yen, the 200-hour moving average.
It was well below a peak of 94.22 yen hit on Monday after Japan
escaped direct criticism from its G20 peers at the weekend.
Choi Hee Nam, South Korea's director-general at its finance
ministry, said that while Japan was not singled out at this
weekend's Group of 20 meeting, its monetary and fiscal policies
that have weakened the yen were not endorsed by the group and
did spark controversy, according to Bloomberg News.
Some analysts see further near-term losses in the dollar
against the yen, with investors hesitating to re-test last
week's 33-month high of 94.42 yen, when it failed to breach a
reported options barrier at 94.50.
The yen's fall could also slow as investors become wary of
betting on further yen weakness until there is more clarity on
who will become the next Bank of Japan governor.
Tokyo has delayed nominating a new governor for its central
bank by a week, fanning talk of friction between the prime
minister and the finance minister on the issue.
The euro was down 0.1 percent at 125.27 yen.
Against the dollar, the euro rose 0.3 percent to $1.3391
, helped by upbeat data on German economic sentiment. The
ZEW index rose to its highest since April 2010, beating even the
highest forecast in a Reuters poll.
The euro moved further away from a three-week low of $1.3306
hit on Friday, with traders reporting bids at $1.3310-15.
Investors, however, grew cautious ahead of Italian elections
this weekend, which should cap any euro rally.
"The euro has derived no obvious benefit from the better
German data," said Bob Lynch, chief currency strategist at HSBC
in New York. He cited several bearish technical indicators on
euro/dollar, such as the five-day moving average close to
crossing the 40-day moving average.
All those indicators suggest more downside than upside risk
for the euro against the dollar, Lynch said, and he would look
to sell toward the $1.3400 area.
Europe's shared currency also rose sharply against sterling,
gaining 0.6 percent to 86.78 pence on growing
speculation that Britain could lose its triple-A credit rating.
The euro has come under selling pressure in the wake of
recent data revealing a deeper-than-forecast euro zone recession
and on concerns that Italy's Feb. 24-25 election could fragment
parliament, potentially hampering the country's reform efforts.
The dollar index, meanwhile, slipped 0.1 percent to 80.464,
still within striking distance of the 80.727 six-week
high hit on Monday.