* Investors await Bernanke testimony, BOJ meeting outcome
* Higher Japanese bond yields won't support yen -strategist
By Lisa Twaronite
TOKYO, May 22 The dollar edged down against the
yen in early Asian trade on Wednesday, moving away from last
week's 4-1/2-year high against the Japanese currency, after
comments from two U.S. Federal Reserve regional presidents
suggested the central bank will continue its bond-buying scheme.
Moves were relatively small as investors awaited the outcome
of the Bank of Japan's regular two-day policy meeting later in
the session, and testimony from Fed Chairman Ben Bernanke as
well as minutes from the Fed's last policy meeting. Bernanke
will speak at 1400 GMT.
"Given words from other Fed members ahead of Bernanke's
testimony, we're not expecting Bernanke to signal taking a step
back from bond-buying anytime soon, so that could be a
short-term negative for the dollar," said Andrew Wilkinson,
chief economic strategist at Miller Tabak & Co. in New York.
"I would expect him to be upbeat about the economic
assessment but cautious about headwinds, which is what he's been
previously," he added.
The dollar slipped about 0.1 percent to 102.36 yen
St. Louis Fed President James Bullard and New York Fed
President William Dudley, both voting members of the Fed's
policy-setting committee, hinted at a continuation of the status
quo on the Fed's quantitative easing.
Bullard told an event in Frankfurt the Fed should maintain
its policy, adjusting the pace of its bond buying according to
incoming data, and said U.S. inflation has recently been below
Dudley said the economy's ability to tolerate less
government spending and higher taxes in coming months will be
key as to whether the Fed opts to reduce its bond purchases.
The BOJ is not expected to make any changes to its monetary
policy after last month's drastic overhaul, but many bond market
participants are hoping the central bank will make adjustments
to its bond market operations to smooth recent volatility.
The recent rise in Japanese government bond yields will not
support the yen, as the increase in volatility has hurt the
confidence of Japanese investors in yen bonds, Osamu Takashima,
chief currency analyst at Citibank, said in a note to clients.
On Monday, the yen strengthened from Friday's 103.32, its
weakest level against the greenback since October 2008, after
Japanese economics minister Akira Amari suggested at the weekend
that the yen's overvaluation had been largely corrected.
Against a basket of currencies, the dollar
fell 0.2 percent from late U.S. levels to 83.735, while the euro
added 0.1 percent to $1.2920,
The Australian dollar inched up 0.1 percent to
$0.9815 after earlier climbing as high as $0.9842, pulling away
from an 11-month low of $0.9711 plumbed earlier this week.
The Aussie has lost more than 5 percent so far this month,
pressured by fears of a Chinese slowdown and lower commodity
prices as well as recent signs of a U.S. economic recovery.