* Japan intervenes for first time in six years
* BOJ continues to buy dollars in European session
* Dollar rises to 85.53 yen, runs into strong offers
* Key Ichimoku resistance at 86.40 untested
(Adds quote, updates throughout)
By Neal Armstrong
LONDON, Sept 15 (Reuters) - The dollar jumped more than two
yen from a 15-year low after Japan intervened to sell yen for
the first time in six years, but with key chart levels yet to
break, traders were sceptical the impact would be sustained.
The intervention helped propel the euro, Australian dollar
and sterling sharply higher on the day against the Japanese
currency, although traders doubted Japan had bought anything
other than dollars for yen.
Finance Minister Yoshihiko Noda said Japan intervened in the
currency market as the impact of the yen's rise on the economy
could not be ignored and that Japan would continue to take
action, but that it had been acting alone.
The Bank of Japan acts for the Ministry of Finance in
intervention, which traders said continued in the Asian and
European sessions after an initial bout at around 83 yen per
dollar shortly after the dollar hit a 15-year low of 82.87 yen.
At 0939 GMT, the dollar was up 2.2 percent at 85.21 yen
<JPY=>, close to a session high of 85.53 hit on trading platform
EBS. The euro was 2.5 percent higher at 110.54 yen <EURJPY=R>
after briefly entering its Ichimoku Cloud, an indicator used to
gauge momentum and future areas of support and resistance, at
111.01.
"I think we're now going to see persistent official buying
of dollar/yen in the near-term," said Adam Cole, head of
currency strategy at RBC Capital Markets.
Traders said official intervention persisted into the
European session, with buying of dollars reported in the
84.95/85.00 area and at 85.25 on trading platform EBS, before
strong offers above 85.50 capped the move.
"The rally will probably stall in the high 80s unless the
U.S. economy bounces back or the Fed switches to a more hawkish
policy. Until that happens, I dont think the gains in the
dollar/yen can be sustained," said Lee Hardman, currency
economist at Bank of Tokyo Mitsubishi-UFJ in London.
Some stop-losses were reported at 85.75, but technical
analysts said the focus remained on the downside while
dollar/yen held below key resistance at 86.40, which is the
bottom of the closely watched Ichimoku Cloud.
Implied dollar/yen volatility was higher with the one-month
<JPY1MO=> trading around 12.50 percent up from 12.3 on Tuesday
but well below year-to-date highs seen in May near 18.00.
Risk-reversals, the premium required to hold a put or a call
in a currency, were showing less of a bias for yen calls. The
one-month 25-delta stood around 0.70 for yen calls compared with
1.50 on Tuesday <JPY1MRR=ICAP>
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For dollar/yen correlations http://link.reuters.com/wyn43p
For PDF on the yen's rise http://r.reuters.com/zuz33p
For graphic on intervention http://link.reuters.com/qep63p
For Reuters Insider on yen http://link.reuters.com/sav63p
and http://link.reuters.com/peb53p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
The Bank of Japan started buying the dollar from around
10:30 a.m. (0130 GMT) on Wednesday.
Sources familiar with the matter said the central bank was
ready to leave the intervention unsterilised -- holding off
draining the funds that went into the currency market through
the yen selling. []
The action was Japan's first currency market intervention
since March 2004, when it halted a 15-month campaign to sell the
yen after selling 35 trillion yen. Traders cited market
estimates the latest intervention amounted to around 1.5
trillion yen ($17.67 billion)
DECISIVE STEPS
Noda said Japan would take decisive steps if necessary,
including intervention, and watch currency market moves closely.
Analysts said the impact of intervention was likely to
diminish after speculative long yen positions had been eroded.
"Speculators have been long of yen so there is scope for
further yen selling. But there's scepticism over whether the
Japanese can change the trend as fundamentals haven't altered,"
said Beat Siegenthaler, fx strategist at UBS.
The yen gained fresh momentum on Tuesday after Japanese
Prime Minister Naoto Kan won a leadership ballot against a rival
seen as more willing to intervene to weaken the currency.
The dollar was down slightly against the euro at $1.2980
<EUR=> with traders reporting German selling. Good bids were
highlighted at $1.2960 and $1.2940.
(Additional reporting by TOKYO markets team; editing by
Nigel Stephenson)
