* 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 (Reuters) - 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 January.
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 inconclusive.
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 80.940.