* Japan's Amari warns of negative impact of weak yen
* Yen regains ground vs dollar on minister's comments
* Dollar could gain on safety bid related to debt ceiling
* German data weighs on euro
By Julie Haviv
NEW YORK, Jan 15 The yen rose against the dollar
on Tuesday, rebounding from four straight sessions of losses
that took it to a 2-1/2 year low as a warning from a Japanese
minister about the disadvantages of excessive yen weakness
caused investors to shed bearish bets.
Expectations of aggressive action from the Bank of Japan to
weaken its currency have driven the dollar sharply higher in
recent months, with the greenback notching a nearly 11.3 percent
gain in the fourth quarter of 2012 and up about 2 percent so far
However, with bets against the yen at lofty levels, many
analysts contend the currency is poised for a short-covering
rally, although it should prove temporary given widespread
forecasts of forceful action from the BoJ to heal Japan's weak
The dollar last traded down 1.1 percent at 88.48 yen,
largely weighed by comments from Japanese Economics Minister
Akira Amari, who said excessive yen weakness could hurt people
by raising import prices.
Amari's comments countered remarks made by officials over
the past month that have strongly encouraged yen weakness.
"I suspect that there is near-unanimity in the market that
the yen has fallen too far, too fast, but also enthusiasm to
sell into corrections such as this," said Kit Juckes, foreign
exchange strategist at Societe Generale in London.
Traders cited support at 88.20 yen, the dollar's 200-hour
moving average, while reported stop-loss sell-orders at 89.50
yen could cap any recovery in the U.S. currency. Traders also
cited option barriers at 90 yen.
The dollar hit a trough of 88.27 yen during the global
session, but losses were pared during the New York session
following an array of U.S. data.
U.S. retail sales rose solidly in December while
manufacturing in New York state contracted for a sixth month in
January. Other data showed inflation pressures remained muted,
with U.S. producer prices falling in December for the third
That should allow the Federal Reserve to stay on its very
easy monetary policy path to nurse the recovery, a negative for
the dollar but a positive for risk appetite.
Nevertheless, the dollar may fare well over the next month
as investors embrace its safety during a looming battle in
Washington over raising the government's borrowing limit, the
so-called debt ceiling.
Republican opposition in Congress to increase the $16.4
trillion ceiling raises the risk that the United States could
default on its debt in coming months.
The dollar's setback came a day after it hit 89.67 yen, its
highest since June 2010.
Bets on aggressive monetary easing from the Bank of Japan
have weighed heavily on the yen in recent months. The central
bank has been under relentless pressure from newly elected Prime
Minister Shinzo Abe to adopt a 2 percent inflation target to
beat deflation once and for all.
It holds its next policy meeting on Jan. 21-22.
Amari's comments also buoyed the yen against the euro, with
the single currency last trading down 1.5 percent at 117.98
yen. The euro on Monday struck 120.12, a 20-month
The euro, which is up about 1 percent against the dollar so
far this year, fell for the first time in four sessions on
concerns about the U.S. debt ceiling debate and weak data from
Germany, Europe's largest economy.
The German economy was hit hard by the euro zone crisis in
the final quarter of last year, shrinking more than at any point
in nearly three years as traditionally strong exports and
investment slowed, the Statistics Office said on Tuesday.
The euro had been rallying in the aftermath of a European
Central Bank meeting last week. Comments by ECB President Mario
Draghi were largely seen as supportive and served to downplay
expectations of a near-term rate cut.
Should data out of the euro zone continue to show economic
weakness, the ECB could opt to lower rates to spur growth.
Despite its fall against the dollar and yen, the euro
extended gains against the Swiss franc, rising to a 13-month
high. The euro rose to 1.23865 francs on trading
platform EBS, its highest level since December 2011.
The Swiss franc has come under selling pressure as concerns
about the euro zone debt crisis have receded, prompting
investors who had bought the Swiss currency as a refuge from the
euro's problems to cut long positions.
After reaching an 11-month high on Monday, the euro last
traded at $1.3334, down 0.4 percent on the day, according
to Reuters data.