* Yen falls after U.S. official Brainard comments, recovers
* Brainard says U.S. supports Japan's efforts to fight
* Yen rebound to be short-lived
* G7 to publish statement on currencies at 1000 GMT
By Anooja Debnath
LONDON, Feb 12 The yen recovered against the
euro and the dollar on Tuesday as speculators took profit after
it slid on comments from a U.S. Treasury official which implied
more tolerance of a weaker yen.
Strategists said the Japanese currency's recovery would be
short-lived as investors would buy the dollar and the euro on
dips against the yen.
The market was also braced for statement on exchange rates
from the Group of Seven industrialised countries, due at 1000
Comments by U.S. Treasury Under-secretary for International
Affairs Lael Brainard late on Monday that the United States
supports Japanese efforts to end deflation, were interpreted by
markets as an acceptance of a weak yen..
The euro was down 0.5 percent at 125.82 yen. It
hit a nearly three-year high of 127.71 yen on Feb. 6.
The dollar was down 0.2 percent on the day at 94.12
yen, not far from 94.465 yen, its highest since May 2010 hit
after Brainard's comments. A UK bank was cited as the main
seller of the pair.
Strong resistance, as well as options positions and
stop-loss orders, were said to lie at 94.50 yen.
Brainard stressed that the Group of 20 needed to deliver on
a commitment to move to market-determined exchange rates and
refrain from competitive devaluation.
The Bank of Japan holds its regular meeting on Wednesday and
Thursday, and is expected to keep policy steady.
"Today we have no strong new material to sell the yen more,
so that's why I think it's natural to buy back the Japanese
yen," said Masashi Murata, a currency strategist at Brown
Brothers Harriman in Tokyo.
In addition to Brainard's comments, European Central Bank
policymaker Jens Weidmann dismissed talk of intervening to
weaken the shared currency on Monday.
The euro was down against the yen and the dollar as
investors remained cautious before the G20 meeting later this
week, at which leaders could address its recent rise.
The euro was down 0.1 percent on the day at 1.34065,
with model funds cited as the main sellers of the single
currencies. Option barriers then $1.3400 and then $1.3425 could
cap its further rise.
Strategists said most speculators would remain buyers of the
euro on dips with stop-loss sell orders below $1.3340. The euro
fall helped the dollar index to a one-month high of
80.484 on Tuesday.
Concerns about the terms of a bailout for Cyprus, which will
be high on the agenda at a meeting of European Union finance
ministers, would also limit the euro's gains, analysts said.
There are also growing worries about Spain's political
scandal, while confidence in Italy has been shaken in the run-up
to the Feb. 24-25 election.
"The euro sell-off is quite modest but reflects a general
risk-off sentiment and also fears the European politicians might
talk about the euro's strength at the G20 meeting," Danske's
However, he added that the euro's general rising trend was
probably intact and worries about Spain and Italy and the
bailout for Cyprus would be minor bumps along the way.
"We recommend our clients buy the euro on these dips as we
think the euro recovery will continue," Rasmussen said, adding
the ECB would not revert to unconventional measures and that its
monetary policy would be out of sync with other major central
banks which would continue to pump in stimulus.