* 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 93.00 yen, down about 0.5 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 buy dollars around the 93-yen level, and helped push the dollar as low as 92.82 yen at one point.
The euro slipped around 0.6 percent to 125.02 yen , up from a session low of 124.75 yen. 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.
The official, who declined to be identified or be quoted directly, pointedly refused to say whether Ottawa or the G7 was concerned about excess yen movements, underscoring how sensitive the subject of currencies has become.
"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.
In their statement, G7 governors and ministers reaffirmed their commitment that fiscal and monetary policies would not be directed at devaluing currencies. Ÿ
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 takes the helm.
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 $1.3443, 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 0.4 percent to $1.0348 , although it remained under pressure after the Reserve Bank of Australia left the door open to more rate cuts last week.