* G7 signals concerns about currency volatility
* Short covering sweeps yen sharply higher
* Market also waiting for BOJ meeting outcome Thursday
By Lisa Twaronite and Ian Chua
TOKYO/SYDNEY, Feb 13 The yen held firm in Asian
trading on Wednesday, having swung sharply higher as investors
cut bearish positions after an official from the Group of Seven
cited concerns about excessive movements in Japan's currency.
A G7 official said the group's statement was meant to signal
concerns about excessive yen moves, prompting a vicious reversal
in the currency.
The yen had slumped nearly 20 percent against the greenback
since November, picking up speed as Japan's new government put
relentless pressure on the Bank of Japan to launch more
aggressive policy easing to defeat deflation. That gave
investors incentive to sell yen, and some market participants
said the G7's words do not alter the trend.
"It is very natural for the G7 to make a note of such a
rapid currency move, like the yen's drop in the past several
months," Toshiyuki Suzuki, senior market economist at the Bank
of Tokyo-Mitsubishi UFJ in Tokyo.
"But overall, what the G7 said did not change the basic
thinking in the Tokyo market, and no one expects the yen to fall
back to previous ranges in the 80's [against the dollar] because
of it," he said.
The dollar was changing hands at 93.23 yen, down
about 0.3 percent from the previous day and moving away from a
nearly three-year high of 94.465 reached on Monday. Japanese
importers were said to want to buy dollars around the 93-yen
level, close to the previous session's low of 92.95.
The euro slipped around 0.5 percent to 125.50 yen
, after shedding more than one yen on Tuesday. It hit
a nearly 3-year high of 127.71 yen on Wednesday last week.
In a volatile session on Tuesday, the yen at first weakened
after Japanese Finance Minister Taro Aso said a G7 statement
recognised that Japan's reflationary policies are not aimed at
affecting foreign exchange markets.
A Canadian official later chimed in, saying the statement
was aimed at calming rhetoric on currencies, perhaps a hint that
some G7 members feel Japan has been too vocal about its need for
a softer yen.
"In an effort to soothe excessive moves in the yen, the G7
has in fact stoked excessive moves in the yen. How ironic," said
Christopher Vecchio, currency analyst at DailyFX.
Investors were also likely to tread cautiously ahead of the
outcome of a BOJ meeting ending on Thursday, although many
expect the bank to hold off on any fresh easing measures until a
new governor is appointed.
Following the BOJ, the Group of 20 nations will meet in
Moscow on Friday and Saturday.
With a resurgent yen in centre stage, the other major
currencies were mostly relegated to the sidelines. The euro
drifted lower against the greenback, edging to $1.3444,
back toward a two-week low of $1.3325 plumbed Monday.
Commodity currencies also recovered a bit of ground against
the U.S. dollar. The Aussie dollar rose 0.3 percent to $1.0338
after popping back above $1.0300, although it remained
under pressure after the Reserve Bank of Australia left the door
open to more rate cuts last week.
Later on Wednesday, euro zone industrial production figures
are due, while U.S. retail sales will probably be the key focus
for many investors.