* Aso says not considering foreign bond buying by BOJ
* Dollar/yen failure to clear 33-month high points to solid
* Uncertainty on next BOJ Governor may curtail yen selling
* Euro soft after Draghi repeats wariness over appreciation
* Dollar/yen pares losses to 0.1 pct
By Hideyuki Sano
TOKYO, Feb 19 The yen rose on Tuesday after
Japanese ministers played down talk of foreign bond buying by
the country's central bank, a day after Prime Minister Shinzo
Abe said such a policy could be one option for monetary easing.
Finance Minister Taro Aso told a news conference that he was
not considering foreign bond purchases, while Economy Minister
Akira Amari said Abe's comments on Monday simply referred to
policy options countries have in general.
Their comments sent the dollar as low as to 93.56 yen
, though it pared much of the losses to last trade at
93.90 yen, 0.1 percent below its late European session levels.
U.S. financial markets were closed on Monday for the President's
While sentiment towards the yen is weak, the dollar has
hesitated to re-test a 33-month high of 94.47 yen set last week,
due in part to selling by option players hedging their barrier
option positions at 94.50 yen.
"The fact that the dollar/yen couldn't break above last
week's high yesterday points to the strength of the resistance,"
said Teppei Ino, currency analyst at the Bank of
Some strategists also said the yen's fall could lose
momentum for now as investors became wary of betting on further
yen weakness until there is more clarity on the next Bank of
Economy Minister Amari said on Tuesday the government will
decide on Bank of Japan's new governor and two deputy governors
after Prime Minister Abe returns from a trip to the United
States on Feb. 21-24.
Sources have told Reuters that former top financial
bureaucrat Toshiro Muto is the leading candidate to become
Japan's next central bank governor, replacing Masaaki Shirakawa.
"Whoever becomes governor, the BOJ will have to take bold
easing steps. I don't think the yen's downtrend has changed,
though its pace might slow a little bit from now," said Seiya
Nakajima, chief economist at Itochu Corp.
The euro licked its wounds near a three-week low against the
dollar after European Central Bank President Mario Draghi
reiterated his wariness about the currency's appreciation.
The euro stood at $1.3343, little changed from late
European levels and a tad above a three-week low of $1.3306 hit
Speaking before the European Parliament, Draghi said the
euro's exchange rate was not a policy target but was important
for growth and stability, adding that appreciation of the euro
"is a risk".
The euro has been under selling pressure in the wake of data
recently revealing a deeper-than-forecast euro zone recession
and on concerns about the outcome of an election in Italy at the
weekend as Prime Minster Mario Monti's reforms have drawn
criticism from all the political spectrums.
"Should the election lead to a hung parliament and raise
doubts about whether Italy will pursue Monti's reform policy,
that would give speculators such an easy chance to sell the
euro," said Itochu's Nakajima.
Against the yen, the euro stood little changed at 125.25 yen
, though it has lost a bit of momentum after hitting a
34-month high of 127.71 yen earlier this month, having gained
almost 27 percent since mid-November at that point.
An immediate focus for the currency is the German economic
sentiment index due at 11:00 a.m. (1000 GMT). Economists expect
the ZEW index to improve to a 2-1/2-year high..
As the euro wilted, the dollar index held firm near a
six-week high of 80.727 hit on Monday. It last stood at 80.653
but faces resistance from its 200-day moving average at
The British pound was listless near a seven-month low of
$1.5438 on Monday after a comment from Bank of England policy
maker that the currency may need to fall further. It last stood
Sterling is also coming under pressure from recent poor data
that has stoked worries over another British recession, as well
as speculation that incoming BoE chief Mark Carney may take
drastic easing steps akin to the policies that Japan's
government is pressuring the Bank of Japan to adopt.