* Yen hits 3-month low vs dollar, 7-week low vs Aussie
* Talk of new dollar longs as market looks to 100 yen
By Charlotte Cooper
TOKYO, Feb 26 (Reuters) - The yen tumbled to a three-month
low against the dollar on Thursday and a seven-week low against
the Australian dollar, as bets against it mounted aided by
concerns about Japan's economic outlook.
Data showing portfolio flows out of Japan last week
underscored the yen's loss of favour as a safe-haven bid, with
many now discussing how far it can fall as technical sell signals
fuel negative yen sentiment.
The yen has shed more than 10 percent since hitting a 13-year
high of 87.10 yen per dollar <JPY=> in January, and short-term
speculators have been forced to unwind bets that it would revisit
that level, helping push the currency even lower.
"It is possible that the dollar will temporarily rise near
100 yen," Takahide Nagasaki, chief forex strategist at Daiwa
Securities SMBC, said in a note to clients.
Nagasaki said the dollar was gaining strength as the yen's
outlook, which has been hurt by political uncertainty and low
expectations for stimulus plans to help the economy, has shown no
sign of improving.
But a rebound in implied volatility for dollar/yen despite
its rise towards 100 indicated that market players remained
nervous about a sudden reversal in the yen's slide, Nagasaki
said.
"Radical action in the U.S. auto sector and a clearer outlook
for stability in the financial system are necessary for a
decisive rise in the dollar," he said.
The dollar rose as high as 97.98 yen <JPY=> on trading
platform EBS, its highest since mid-November and up 0.4 percent
on the day.
One-month implied volatility on dollar/yen options has risen
to around 18 percent <JPY1MO=> after falling as low as near 16
percent earlier this week.
The euro climbed 0.4 percent to 124.38 yen <EURJPY=>, after
touching a seven-week high of 125.16 yen on Wednesday.
SELL JAPAN?
Foreign investors sold a net 450.8 billion yen ($4.63
billion) of Japanese stocks last week, their biggest net weekly
selling since November, capital flow figures showed.
Also, Japanese investors were net buyers of overseas stocks
and bonds. []
Analysts caution that not all of the foreign bond
transactions by Japanese investors seen in the weekly data always
involve currency transactions, but some say the numbers suggest
there could be more momentum to the yen's fall in the short term.
"Long term it's questionable that it will necessarily last
but at least for now there are some early signs that Japanese
investors are becoming more adventurous in investing abroad
again," said David Mann, a senior currency strategist at Standard
Chartered.
"The increasingly worrying signs about economic growth and
the potential for Japan to contract even more than other major
economies is also something that may be adding to this pressure."
Bank of Japan board member Tadao Noda said on Thursday the
economy was worsening more than the central bank had forecast in
January. []
On the charts, the dollar/yen rate has pushed through some
key levels this week, breaking above the 38.2 percent retracement
of its August to January fall and the 23.6 percent retracement of
its longer-term decline from mid-2007.
Market players have been waiting for signs that Japanese
investors are repatriating funds ahead of the fiscal year-end at
the close of March.
Many say the repatriation has not yet materialised but some
caution it still could, which would then put the brakes on the
yen's slide.
The Australian dollar struck a seven-week high of 63.69 yen
<AUDJPY=R>, according to Reuters data, after figures showing
Australia's business spending jumped in the fourth quarter.
The euro edged down to $1.2716 <EUR=>, after tumbling 0.8
percent on Wednesday, following data showing the pace of existing
U.S. home sales fell 5.3 percent in January, weighing on stocks
and rekindling demand for the safe-haven dollar, analysts said.
(Additional reporting by Masayuki Kitano and Satomi Noguchi;
Editing by Chris Gallagher)
