October 31, 2011 / 11:57 AM / 8 years ago

CORRECTED-FOREX-Yen slides to 3-mth low vs dlr after intervention

* Yen slides vs dollar as Japan intervenes to stem its
    * Dollar/yen off earlier highs as traders test their resolve
    * More intervention expected, dollar seen unlikely to
sustain gains
    * Traders estimate around $65-75 billion of intervention

    By Jessica Mortimer	
    LONDON, Oct 31 (Reuters) - The yen slid sharply against the
dollar, hitting a three-month low after Japan stepped into the
market to curb the currency's appreciation, though traders said
more intervention would likely be needed to secure a
long-lasting impact.    	
    European traders were inclined to test Tokyo's resolve,
pushing it below 78 even though there had been talk of possible
official bids around there. This brought it well below an
earlier high of 79.55 yen on EBS trading platform.	
    "The focus is to make it as painful as possible to hold long
yen/short dollar positions," said Sebastien Galy, currency
strategist at Societe Generale.	
    "If dollar/yen continues to go aggressively lower then the
Japanese authorities will feel the need to intervene again".	
    The dollar was still shy of its 200-day moving average
around 79.88 yen, though some traders speculated Japanese
authorities may look to push it above 80 yen. It was last up
2.75 percent at 77.83 yen .	
    Finance Minister Jun Azumi said Tokyo stepped into the
market on its own at 1025 am. local time (0125 GMT) and would
keep intervening until it was satisfied with the results.	
    Traders estimated the Bank of Japan could have bought
between $65 and $75 billion against the yen, which would be more
than its Aug. 4 intervention, when it was a record $59.4
billion. The scale of the intervention demonstrated the
authorities' resolve, but more was expected given substantial
long yen positions in the market.	
    Data showed speculators doubled their net long position in
the yen to 54,279 contracts in the week to Oct. 25, the highest
since the beginning of August. The intervention came
after the dollar hit a fresh record low of 75.31 yen.	
    "If the Bank of Japan wants to avoid the dollar slipping
back quickly towards 76 yen very soon they will need to come in
again to really make the point," said Niels Christensen,
currency strategist at Nordea in Copenhagen.	
    He said the authorities would want to avoid a repeat of what
happened following the previous intervention in early August,
when the dollar's sharp gains against the yen proved brief and
it quickly dropped back down again.	
    Some traders speculated that Japan might want to set a
Swiss-style floor for the dollar/yen rate, though many were
sceptical authorities could peg the yen to any particular level
in the long term.	
    The options market showed bets on yen gains against the
dollar on a one-month horizon had not eased significantly,
reflecting the market's belief that the impact of intervention
would not last more than around 2-3 weeks.	
    Analysts said the authorities' task could be made difficult
as Japanese exporters may sell into the dollar's rally to step
up their currency hedging.	
    G20, ECB AHEAD	
    Tokyo's latest foray followed warnings that its patience
with yen strength was wearing thin, and came just days before
the Group of 20 leaders' summit in France, where the euro zone
debt crisis was expected to dominate the agenda. 	
    Japan will be keen to win G20 understanding that a strong
yen is one challenge too many for an economy still grappling
with the effects of March's massive earthquake and tsunami.	
    The sharp rise in dollar/yen prompted across-the-board gains
in the dollar, causing the euro to erase most of last week's
sharp rise after a deal by European leaders to tackle the
region's debt problems.	
    An Italian debt sale on Friday saw the country pay record
high yields, underscoring concerns that last week's plan leaves
many issues unresolved.	
    The euro was down more than 1 percent at $1.3994 , off
a two-month high of $1.4248 hit late last week. Analysts said it
could remain weak ahead of a European Central Bank policy
meeting on Thursday, where an interest rate cut for December may
be flagged. 	
    However, the dollar could also come under renewed pressure
if U.S. policymakers announce plans to explore further easing
measures to support growth after a Federal Reserve two-day
policy meeting starting Tuesday.	
    The dollar index rose 1.2 percent to 76.006 .
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