* Japan's Amari warns of negative impact of weak yen
* Dollar could gain on safety bid related to debt ceiling
* German data weighs on euro
* Eurogroup's Juncker's move say euro FX rate "dangerously
By Gertrude Chavez-Dreyfuss
NEW YORK, Jan 15 The yen was on track for its
biggest one-day gain against the dollar in eight months on
Tuesday as a warning from a Japanese minister about the
disadvantages of excessive yen weakness prompted investors to
pare back bearish bets.
The euro, meanwhile, fell against the dollar after three
straight days of gains, pressured by weak German data and the
yen's strength across the board. Europe's shared currency was on
pace for its worst showing against the yen since last June.
The euro dropped sharply in mid-afternoon trading against
both the dollar and yen, with traders citing a news report
quoting Eurogroup head Jean-Claude Juncker as saying that the
single currency's exchange rate was "dangerously high."
Juncker's comments ran on Bloomberg News, traders said.
Vassili Serebriakov, currency strategist, at BNP Paribas in
New York was a bit surprised at Juncker's comments, coming as
they did a few days after European Central Bank President Mario
Draghi said in a press briefing that the euro is currently at
its long-term average versus the dollar.
"I don't think this signals a coordinated move among
European officials to talk down the euro," Serebriakov said.
"The euro's move hasn't been that extreme overall."
The euro has risen 0.7 percent against the dollar and 3.0
percent versus the yen so far this year. In the fourth quarter
last year, the euro rose 2.7 percent against the greenback and
surged more than 14 percent versus the yen.
Meanwhile, expectations of aggressive action from the Bank
of Japan to weaken the yen have driven the dollar and euro
sharply higher in recent months. The greenback notched a nearly
11.3 percent gain in the fourth quarter of 2012 and has risen
more than 2 percent so far this year.
However, remarks by Japanese Economics Minister Akira Amari
on Tuesday made investors nervous about the yen's fall. He said
excessive yen weakness could hurt people by raising import
Amari's comments countered remarks made by officials over
the past month that have strongly encouraged yen weakness.
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 economy.
"The rally in the yen is a function of what Amari said
overnight and the fact that global investors are taking money
off the table for now because the dollar and euro have risen too
far, too fast," said Sean Cotton, vice president and foreign
exchange adviser at Bank of the West in San Ramon, California.
The dollar last traded down nearly 1.0 percent at 88.59 yen
, its worst day since May 2011. It hit a trough of 88.27
yen during the global session, but losses were pared in North
America following the release of a mixed batch of U.S. economic
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 a third
The dollar, however, 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.
The dollar's setback on Tuesday came a day after it hit
89.67 yen, its highest since June 2010.
Bets on aggressive easing from the Bank of Japan have
weighed heavily on the yen in recent months. The BoJ has been
under pressure from newly elected Prime Minister Shinzo Abe to
adopt a 2 percent inflation target to beat deflation.
The BoJ 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 1.3 percent at 118.17
yen. The euro on Monday hit a 20-month peak at 120.12.
The euro, which is up about 1 percent against the dollar
this year, had earlier slid on concerns about the U.S. debt
ceiling debate and weak data from Germany, Europe's largest
The German economy was hit hard by the euro zone crisis in
the final quarter of 2012, shrinking more than at any point in
nearly three years as traditionally strong exports and
investment slowed, the Statistics Office said on Tuesday.
After reaching an 11-month high on Monday, the euro last
traded at $1.3297, down 0.6 percent on the day. It fell
as low as $1.3266 on Juncker's comments.
The euro had been rallying in the aftermath of a European
Central Bank meeting last week. Comments by the ECB's Draghi
were largely seen as supportive and served to downplay
expectations of a near-term rate cut.
Despite its fall against the dollar and yen, the euro
extended gains against the Swiss franc, rising to a fresh
13-month high. The euro rose to 1.2413 francs, its
highest 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 franc as a refuge from the euro's
problems, to cut long positions.