* Talk of Japanese investors and exporters buying yen
* More Japanese exporter dlr offers seen at Y86.50-Y89.00
* Japan margin traders' net long USD/JPY position $1.46 bln
* Canadian dlr holds gains on huge corporate takeover bid
By Masayuki Kitano
TOKYO, Aug 18 (Reuters) - The yen rose on Wednesday, with
traders citing yen buying by Japanese investors and exporters,
while the Canadian dollar held gains scored on news of a huge
takeover bid by global miner BHP Billiton for Canada's Potash
Corp.
The yen dipped against the dollar and the euro in early Asian
trading, staying on the defensive after retreating the previous
day as U.S. and European shares rose and U.S. Treasury yields
edged higher.
But the yen later received a boost, with market players
citing yen buying by Japanese investors and exporters in yen
crosses and the dollar.
The dollar shed 0.1 percent against the yen to 85.40 yen
<JPY=>, slipping back toward a 15-year low of 84.72 yen hit on
EBS last week.
"The trend in dollar/yen remains downward," said Jun Kato,
senior manager of the investment department at Shinkin Asset
Management.
"The talk in the market is that a huge pile of dollar offers
awaits above 86.50 yen. Given that, players must be thinking that
chasing the dollar above 86.00 yen is a waste of time."
The euro fell 0.4 percent to 109.67 yen <EURJPY=R>, giving
back much of the previous day's 0.6 percent gain and slipping
back towards a nearly seven week low of 109.07 yen hit on trading
platform EBS earlier this week.
Against the dollar, the euro dipped 0.3 percent to $1.2852
<EUR=>.
The dollar's moves against the yen have recently had a high
correlation with U.S.-Japanese government bond yield spreads,
which have narrowed as U.S. Treasury yields fell sharply in the
past few months.
In addition to the talk of yen buying by Japanese exporters
on Wednesday, a manager at a major Japanese bank said Japanese
exporters were placing dollar offers from around 86.50 yen to
89.00 yen, having lowered their target levels for selling the
dollar from around 90 yen previously.
MARGIN TRADERS
Data from the Tokyo Financial Exchange showed Japanese margin
traders' net long positions in dollar/yen stood at 146,095
contracts -- about $1.46 billion in value -- on Tuesday, down
form a recent peak of 182,966 contracts on Aug. 6 but still a
very high level historically.
Margin traders with dollar bets are likely to take profits
when the greenback rises, limiting gains in the currency.
When the dollar falls sharply, Japanese retail margin traders
could be forced to cut long dollar positions, adding momentum to
the drop, traders said.
The dollar edged up 0.1 percent against the Canadian dollar
to C$1.0333 <CAD=D4>, trimming a bit of its losses after shedding
more than 1 percent on Tuesday.
The Canadian dollar had surged on Tuesday after BHP Billiton
<BLT.L> <BHP.AX> launched an unsolicited $38.6 billion bid for
Canada's Potash Corp. []
Investors are watching whether the Bank of Japan 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.
Japanese authorities seem unlikely to conduct yen-selling
intervention, however, unless the yen's rise accelerates sharply,
market players say.
A more likely response would be some form of monetary easing
by the BOJ such as expanding the amount or maturity of a
three-month fixed-rate fund supply operation, which the central
bank decided to adopt last December after the dollar dropped
below 85 yen in late November.
An options trader for a major Japanese bank said there was
scepticism among Japanese traders over whether any BOJ easing
measures would have much impact on the yen with Japanese interest
rates already so low, and there were also doubts about whether
the central bank would unveil any easing steps in the near term.
While market speculation about possible steps by the BOJ may
lend support to the dollar against the yen for now, the dollar
may eventually extend its decline if the market is disappointed
by any BOJ measures or if it takes no action, the trader said.
"In the end there could be disappointment, in which case the
dollar may fall towards 83 yen," he said.
(Additional reporting by Kaori Kaneko and Rika Otsuka; Editing
by Edmund Klamann)
