* Yen gains as Aso says not considering foreign bond buying
* Dollar/yen faces solid resistance around 94.50 yen
* Euro soft after Draghi repeats wariness over appreciation
* Strong German ZEW data could give euro a small boost
By Jessica Mortimer
LONDON, Feb 19 The yen rose on Tuesday after
Japan's finance minister played down talk of foreign bond buying
by the central bank, although the broad trend for a weaker
currency was expected to remain intact.
The euro remained weak after falling on Monday when European
Central Bank President Mario Draghi said the central bank would
have to assess the impact of the currency's appreciation, and on
wariness before an election in Italy.
The yen turned higher after Japanese Finance Minister Taro
Aso said he was not considering foreign bond purchases as part
of efforts to ease monetary policy, a day after Prime Minister
Shinzo Abe said this was an option.
But expectations the Bank of Japan will pursue aggressive
monetary easing left intact expectations for further yen falls.
"The Aso comments are the reason we have seen the yen
strengthening ... But this is just a consolidation phase and the
general trend for yen weakness will remain," said Antje
Praefcke, currency strategist at Commerzbank in Frankfurt.
She said investors were locking in profits as the dollar
stayed stuck below resistance at 94.50-95.00 yen. Commerzbank
expect the dollar to rise to 100 yen by year-end.
The dollar was at 93.48 yen, well below a peak of
94.22 yen hit on Monday after Japan escaped direct criticism
from its G20 peers at the weekend for pursuing ultra-easy
monetary policies that weaken its currency. However, it remained
above chart support at 93.38 yen, the 200-hour moving average.
Having risen about 20 percent since mid-November, the dollar
has hesitated to re-test last week's 33-month high of 94.47 yen
when it failed to breach a reported options barrier at 94.50.
"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
Tokyo-Mitsubishi UFJ in Tokyo.
The euro was down 0.3 percent at 124.69 yen,
having hit a 34-month high of 127.71 yen earlier this month.
But some strategists said the yen's fall could lose momentum
as investors become wary of betting on further yen weakness
until there is more clarity on the next BOJ governor.
Japan's government has delayed nominating a new governor by
a week, fanning talk of friction between the prime minister and
the finance minister.
The euro was down 0.1 percent on the day at $1.3348,
staying near a three-week low of $1.3306 hit last Friday though
traders reported bids at $1.3310-15.
It could get a lift, however, if a German sentiment survey
at 1000 GMT shows an improvement. The ZEW economic sentiment
index is expected to rise to 35.0 in February from 31.5 in
The euro has come under selling pressure in the wake of
recent data revealing a deeper-than-forecast euro zone recession
and on worries an Italian election this weekend could be
Investors are concerned that Italy's Feb. 24-25 vote could
fragment parliament, hampering the country's reform efforts.
"Should the election lead to a hung parliament ... that
would give speculators such an easy chance to sell the euro,"
said Seiya Nakajima, chief economist at Itochu Corp in Tokyo.
Draghi also indirectly expressed concern about the euro's
recent gains on Monday, telling EU lawmakers the exchange rate
was not a policy target but was important for growth and adding
that appreciation of the euro "is a risk".
As the euro wilted, the dollar index held firm near a
six-week high of 80.727 hit on Monday. It was last at 80.570
but faced resistance from its 200-day moving average at