* Yen near 13-yr peak vs dlr, G7 warns on volatile yen
* Nikkei fall to 26-yr low overshadows G7 warning
* Traders say joint intervention unlikely, Japan may go solo
* RBA confirms Aussie-buying Friday, says will intervene
By Eric Burroughs
TOKYO, Oct 27 (Reuters) - The yen climbed towards an all-time
high against the Australian dollar on Monday as investors kept
dumping risky positions and drove Tokyo shares to a 26-year low,
overshadowing a G7 warning about excessive yen volatility.
Group of Seven finance ministers and central bank governors
singled out the excessive volatility of the yen and said they
were concerned about its implications for economic and financial
stability, adding that they will monitor markets closely.
Analysts said the G7 statement suggested authorities were
getting closer to the point where they would consider
intervention, possibly jointly, to stem the yen's gains from
market players unwinding carry trades en masse.
The yen has struck a 13-year peak against the dollar, a
six-year peak against the euro and many other milestones in its
roughly 20 percent surge on a trade-weighted basis this month.
<.IBOXXFXJPY>
The Australian dollar's plunge prompted the country's central
bank to intervene on Friday to provide liquidity and help prop up
the battered currency, stirring speculation that more authorities
will step in. []
"If the dollar falls below 90 yen, financial authorities are
likely to intervene in the forex market," said Masafumi Yamamoto,
head of FX strategy for Japan at Royal Bank of Scotland.
"A dollar drop below 90 yen could accelerate the yen's rise,
having a bad impact on share prices."
Some traders said Japan was more likely to go it alone on
such intervention than with others such as European countries,
which may prefer a weaker euro to soften the blow of a recession.
Japan last intervened in March 2004 to stem yen strength.
"While Japan may launch intervention alone, it is not likely
to have a lasting impact on the forex market," said Minoru
Shiori, chief manager of forex trading at Mitsubishi UFJ
Securities.
Earlier in the day Japanese Finance Minister Shoichi Nakagawa
said he was watching currencies with "great interest" -- an
indication the ministry is on a heightened state of alert when it
comes to potential intervention.
Carry trades -- using the low-yielding yen to buy everything
from higher-yielding currencies to stocks and commodities -- have
collapsed in the past few weeks as market players have been
forced to sell many assets to raise cash.
The Aussie -- the carry trade favourite until just a few
months ago as commodities soared -- has lost almost a third of
its value in October.
Currency moves remained large because few market players were
bold enough to take the other side of trades.
The dollar fell 1 percent from late U.S. trade last week to
93.29 yen <JPY=>, pulling back after rising to near 94.50 yen
after the G7 warning.
On Friday the U.S. currency slid to a 13-year low of 90.87
yen on trading platform EBS during the yen's panicky surge.
The euro was down 1.8 percent at 116.82 yen <EURJPY=R>, near
a six-year low of 113.79 yen hit on Friday. Against the dollar,
the euro dropped 0.7 percent to $1.2528 <EUR=>, near a two-year
low.
The Australian dollar shed 2 percent to $0.6099 <AUD=D4>,
back near a six-year low. Against the yen, the Aussie fell 3.2
percent to 56.85 yen <AUDJPY=R> after sinking to 55.11 yen on
Friday -- the lowest since it was allowed to trade freely.
The yen's surge has reinforced a sell-off in Japan's Nikkei
share average <> that drove it to a 26-year low on Monday
and down by half this year on worries about damage to the
export-dependent economy.
The Nikkei shed 6.4 percent, with bank shares taking a hit on
reports that Japan's top three banks will raise capital as the
stock market plunge hits their capital base.
Hedging tied to structured notes sold to individual investors
and Japanese regional banks as part of the carry trade has added
fuel to the sometimes disorderly moves in Aussie/yen.
Forced selling of stocks and currencies, particularly in
hard-hit emerging market countries, has swamped financial markets
and led to historic volatility across many assets.
The dollar has also soared against most other currencies,
reaching a six-year high against the pound, as investors have
unwound positions in many markets and boosted cash holdings in
the greenback for investor redemptions.
($1=93.87 Yen)
(Additional reporting by Rika Otsuka; Editing by Michael Watson)
