* Yen jumps on report Japanese govt may be happy with
* Other major currencies subdued ahead of key events this
* BOJ meeting, Bernanke's Congressional testimony in focus
By Ian Chua
SYDNEY, May 20 The yen bounced off a 4-1/2 year
low against the dollar early in Asia on Monday in the wake of
reports suggesting the Japanese government might be happy with
the level of the currency following its extended decline.
The dollar last traded at 102.87, having slid about 1
percent from late New York levels to a low of 102.00. The euro
plumbed 131.05 from 132.45 late in New York, before
steadying at 131.95.
Just last Friday, the dollar reached a 4-1/2 year high of
103.32, while the euro hovered near a 3-1/2 year peak of 132.78.
The turnaround came after Japan's economy minister, Akira
Amari, was reported by the Wall Street Journal as saying the
yen's excessive strength has largely corrected and further
weakness in the currency could be harmful.
That sparked some short covering in a very thin market that
exaggerated the yen's bounce.
"It was on the back of those Amari comments ... especially
after the big rally in dollar/yen on Friday. But thin liquidity
is exacerbating the moves," said Sue Trinh, senior currency
strategist at RBC in Hong Kong.
Traders said further declines in dollar/yen will depend on
the outcome of the Bank of Japan (BOJ) May 21-22 policy meeting
as well as Federal Reserve Chairman Ben Bernanke's Congressional
testimony later in the week.
The BOJ is expected to hold off on easing policy further,
but may fine-tune its market operations to stem recent
volatility in the bond market.
Last month, the BOJ unleashed the world's most intense burst
of stimulus, promising to inject $1.4 trillion into the economy
in less than two years to meet its pledge of achieving 2 percent
inflation in roughly two years.
The euro was little changed against the dollar, buying
$1.2831, remaining near a one-month low of $1.2796
reached on Friday.
The Australian dollar was also steadier at $0.9740,
but it too stayed near an 11-month trough of $0.9711 set on
Talk the Federal Reserve might dial down its massive
stimulus programme later this year on the back of some upbeat
economic data had supported the greenback in the past few weeks.
Indeed, data out on Friday showed currency speculators had
increased their bets in favour of the U.S. dollar to the highest
in 11 months in the week ended May 14.
Dollar bulls, however, will be keeping a close eye on
Bernanke's testimony given that he has showed no signs of
wanting to taper the Fed's bond-buying, or Quantitative Easing
(QE), programme any time soon.
"We expect Bernanke to reiterate the Fed's commitment to
accommodative policy stance, while sticking to the latest policy
statement in terms of cost and benefit of further QE, that it is
prepared to increase or decrease the size of purchases as the
economy evolves," analysts at Barclays Capital wrote in a client