* Traders say dollar/yen may re-test 15-yr low of 84.72 yen
* Euro hits 7-week low vs yen near 109 yen
* Kan and Shirakawa likely to meet next Monday-govt source
By Rika Otsuka
TOKYO, Aug 17 (Reuters) - The dollar hovered near a 15-year
low against the yen on Tuesday, weighed down by a slide in U.S.
Treasury yields, putting the focus on whether Japanese
authorities will take any measures to curb the yen's rise.
The dollar dipped as low as 85.11 yen in early Asian trade,
within sight of a 15-year low of 84.72 yen struck last week on
trading platform EBS.
Its fall came in the wake of the previous day's slide in U.S.
Treasury yields, while selling by Japanese exporters at around
the 0100 GMT Tokyo fixing also weighed on it, traders said.
The yen's gains were limited, however, with traders reluctant
to push the currency higher as they waited to see if the
government or the Bank of Japan will take new steps to rein in
its export-sapping strength.
Helping to reinforce such caution, a government source said
Prime Minister Naoto Kan and Bank of Japan Governor Masaaki
Shirakawa are likely to meet next Monday.
The meeting may be brought forward to later this week, the
source said, depending on market developments. []
"There is a trend of dollar weakness stemming from moves in
U.S. Treasuries, but the yen has reached danger levels so it's
becoming a little hard to chase it higher," said a trader for a
Japanese trust bank.
Outright yen-selling intervention seems unlikely, although
the chances of that cannot be ruled out, for example if the yen's
rise gains more steam or the benchmark Nikkei share average
<> slides below 9,000, the trader said. []
The more likely response from Japanese authorities would be
some form of monetary easing by the BOJ, the trust bank trader
said.
The dollar held steady against the yen from late U.S. trading
on Monday at 85.32 yen <JPY=>.
The benchmark 10-year Treasury note yield dived more than 10
basis points to hit a 17-month low of 2.563 percent <US10YT=RR>
on Monday, according to Reuters data.
There has been a strong correlation between U.S.-Japanese
government bond yield spreads, which have been narrowing, and the
dollar/yen rate.
In the latest comments on the yen by a Japanese policymaker,
Economics Minister Satoshi Arai was quoted by Kyodo news agency
as saying the yen's rise may not cease with verbal intervention
alone, adding that its rise may be in the final stage.
[]
Former Japanese currency policy chief Hiroshi Watanabe said
Japan may step into the currency market, possibly on its own, if
the yen climbs about 3 yen against the dollar in a day.
But he said Tokyo does not need to take action now to stem
the yen's strength, given that it is not rising rapidly.
[]
The dollar index, a gauge of its performance against a basket
of six major currencies, fell 0.4 percent to 82.248 <.DXY>.
The dollar index has near-term support at an Aug. 13 low of
82.182 and an Aug. 12 trough of 82.109, while resistance is seen
at a July 21 high of 83.451.
The euro edged up 0.3 percent to $1.2862 <EUR=>, pulling away
from a one-month low of $1.2732 hit the previous day on EBS.
But analysts and traders said the euro remains vulnerable to
concerns about the health of Europe's banking sector and the
sovereign debt situation in peripheral economies
The euro rose 0.3 percent against the yen to 109.75 yen
<EURJPY=> after striking a seven-week low of 109.07 yen earlier
on Tuesday.
"A stronger yen, despite some dismal domestic data, is a sign
the market is calling for new policy steps by the BOJ," said
Hideki Hayashi, a global economist at Mizuho Securities.
Japan's economy grew 0.1 percent in April-June, data showed
on Monday, slowing sharply from the previous two quarters.
[]
(Additional reporting by Masayuki Kitano; Editing by Michael
Watson)
