* Yen regains ground vs dollar on minister's comments
* Japan's Amari warns of negative impact of weak yen
* Euro/Swiss franc rises to fresh 13-month high
By Anooja Debnath
LONDON, Jan 15 The yen rebounded from a
2-1/2-year low against the dollar on Tuesday, as investors took
profit on bets against the Japanese currency after a minister
warned of the potential disadvantages of excessive yen weakness.
Some said the fall in the dollar would be temporary,
however, with investors expected to buy the U.S. currency back
given widespread expectations of aggressive monetary easing by
the Bank of Japan.
The dollar was down 1.2 percent on the day at 88.40
yen, hurt by comments from Japanese Economics Minister Akira
Amari who said excessive yen weakness could hurt people by
raising import prices.
Traders cited support at 88.20 yen, the dollar's 200-hour
moving average, while reported stop loss sell-orders at 89.50
yen could cap any recovery in the U.S. currency. Traders also
cited option barriers at 90 yen.
"While this move was triggered by (the minister's) comments,
there are lots of people out there who believe the yen is
over-extended and so this pull-back isn't that surprising," said
Jane Foley, senior currency strategist at Rabobank.
"We now have to see if the pull-back continues or if people
are looking at this as an opportunity to get even shorter yen."
The dollar's setback came a day after it hit 89.67 yen, its
highest since June 2010.
Bets on aggressive monetary easing from the Bank of Japan
have weighed heavily on the yen in recent months. The central
bank has been under relentless pressure from newly elected Prime
Minister Shinzo Abe to adopt a 2 percent inflation target to
beat deflation once and for all.
It holds its next policy meeting on Jan. 21-22.
The yen's rise pushed the euro down 1.7 percent on the day
to 117.85 yen after Amari's comments. The euro had
struck a 20-month peak of 120.13 on Monday.
SWISS FRANC WEAKENS
Despite its fall against the yen, the euro extended gains
against the Swiss franc, rising to a fresh 13-month high. The
euro rose to 1.23865 francs on trading platform EBS,
its highest level since December 2011.
The Swiss franc has come under selling pressure as concerns
about the euro zone debt crisis have receded, prompting
investors who had bought the Swiss currency as a refuge from the
euro's problems to cut long positions.
Euro/Swiss franc implied volatilities, or demand to hedge
against sharp currency swings, have risen sharply. The one-month
vols have risen to 6.1 percent from around 2
percent before the European Central Bank interest rate decision
"The euro/Swiss franc is a dormant currency and not many
were positioned for this spike higher. As a result, implied
volatilities have exploded," said a chief options trader at an
European bank. He said there was demand for topside option
strikes - bets for the euro to rise to 1.25 francs - but that
level was likely to cap the euro rally.
The euro fell against the dollar as some Asian central banks
booked profits on its latest rally. It last traded at $1.3330
, down 0.4 percent on the day and off Monday's near
11-month of $1.3404.
Greater confidence in the euro zone and receding
expectations of a rate cut in the near term have helped the euro
outperform many of its peers in recent sessions. It was trading
near a 9-1/2 month high against the British pound,
with sterling increasingly vulnerable to concerns about a
fragile UK economy.