* BOJ emergency meeting highly unlikely on Thurs -sources
* BOJ has started considering additional easing steps - media
* Euro slips after Spiegel report on Greece
* Support for euro seen at 100-day MA around $1.2776
* MOF data shows Japan investors buy more foreign debt
By Kaori Kaneko
TOKYO, Aug 19 (Reuters) - The dollar edged up against the yen
on Thursday with investors reluctant to chase the yen higher as
they waited to see if the Bank of Japan or the government will
take new steps to rein in the yen's rise.
Earlier, rumours had circulated in the market that the BOJ
would hold an emergency policy meeting at 2 p.m. (0500 GMT). That
followed a media report that the central bank had started
considering additional monetary easing steps.
The dollar briefly pared its gains against the yen after
sources familiar with the matter said the Bank of Japan is highly
unlikely to hold an emergency meeting on Thursday.
[]
But the dollar remained firm against the yen due to
short-covering, traders said.
Investors are watching to see if the Japanese central bank or
the government will take new steps to rein in the yen's
export-sapping rise ahead of a meeting between Prime Minister
Naoto Kan and Bank of Japan Governor Masaaki Shirakawa expected
next Monday.
The Sankei newspaper said on Thursday that the BOJ has
started considering additional monetary easing steps in line with
government efforts to support the country's economy.
The most likely option under consideration is expanding the
BOJ's fund-supply tool put in place in December, the Sankei said
without citing sources.
The central bank may either expand the fund supply volume to
30 trillion yen ($352 billion) from 20 trillion yen, or extend
the duration of cheap, fixed-rate loans to banks to six months
from three months, the paper said. []
"Such steps by the BOJ may help to spur dollar short-covering
against the yen. But it would be difficult to change the yen's
firm trend," said Tomohiro Nishida, treasury department manager
at Chuo Mitsui Trust and Banking.
The dollar rose 0.3 percent to 85.74 yen <JPY=>, pulling away
from a 15-year low of 84.72 yen hit on trading platform EBS last
week.
"If the BOJ announces only what the report is saying it's
likely to disappoint the market. And there's a possibility the
yen may even appreciate further," said Yuji Saito, director at
Credit Agricole's foreign exchange department.
WATCHING THE CENTRAL BANK
Japanese Finance Minister Yoshihiko Noda repeated on Thursday
that he is continuing to watch foreign exchange moves carefully.
[]
Japanese authorities are seen unlikely to conduct yen-selling
intervention, however, unless the yen's rise accelerates sharply,
market players say.
The euro slipped after a report on the website of German
newspaper Der Spiegel that austerity steps to fix Greece's debt
trouble are damaging its economy, but falls in the euro were seen
limited as the report provided few fresh incentives.
[]
The euro fell 0.4 percent to $1.2805 <EUR=> and support for
it is seen at the 100-day moving average of $1.2776, while rises
could be capped around $1.2900, said a trader at a Japanese bank.
The euro dipped 0.1 percent against the yen to 109.78 yen
<EURJPY=R> after touching a seven-week low of 109.07 yen on EBS
earlier this week.
Japanese investors bought a net 2.18 trillion yen ($25.6
billion) of foreign debt in the week of Aug. 8-14, the largest
volume of purchases since the finance ministry started to gather
its weekly capital flows data in January 2005. []
A source familiar with the data said Japanese banks have been
aggressively buying overseas debt, boosting the net buying
figure. But banks' hefty purchases of foreign bonds are not seen
helping to rein in recent gains in the yen because banks hedge
against foreign exchange volatility when they buy bonds abroad or
raise funds overseas to finance their purchases, the source said.
Banks' buying of U.S. government debt is likely to have
contributed to a fall in Treasury yields and to have been more of
a negative factor for dollar/yen, some analysts say.
The pair's moves have recently had a strong correlation with
U.S.-Japanese government bond yield spreads, which have narrowed
as U.S. treasury yields fell sharply over the past few months.
(Additional reporting by Masayuki Kitano and Rika Otsuka;
Editing by Michael Watson)
