FOREX-Dollar hits 8-month low vs yen on U.S. worries

                                
 * Yen rises on Japanese exporters' month-end bids
                                
 * Euro off 12-week high but supported by dollar weakness
                                
 By Hideyuki Sano
                                
 TOKYO, July 30 (Reuters) - The dollar fell to an eight-month
low against the yen on Friday, hurt by selling from Japanese
exporters and concerns that U.S. GDP data would add to signs of
fading momentum for the U.S. economic recovery.
                                
 In Asian trade, the dollar's fall was primarily driven by
month-end selling from Japanese exporters, which overwhelmed
buying from several new Japanese investment funds launched on
Friday.
                                
 "At the start of this week, it looked like there would be an
end to the dollar/yen's downtrend but now it looks as if there
will be no change and it is set to end the month of July lower,"
said Kakuya Kojoh, the head of securities department at Nissan
Century Securities.
                                
 "The dollar will likely test 86 yen. It could even fall below
85 yen next week." 
                                
 Dollar bears are looking to U.S. second-quarter GDP due at
1230 GMT as a further opportunity to sell the currency, with
economists forecasting growth to slow to 2.5 percent in the three
months to June from 2.7 percent in the first quarter. [ECI/US]
                                
 The GDP data will be followed by U.S. manufacturing and job
figures next week.
                                
 "Today we saw some month-end flows, in both directions, which
dictated price moves today. But when the dust settles, the market
will focus on economic fundamentals," said Hideaki Inoue, manager
of forex at Mitsubishi Trust and Banking.
                                
 The dollar fell 0.4 percent to 86.49 yen <JPY=>. Earlier, it
hit an eight-month low of 86.25 yen on trading platform EBS.
                                
 The yen took in its stride comments by Japanese Finance
Minister Yoshihiko Noda saying he was closely watching the
foreign exchange market, as well as remarks by Deputy Finance
Minister Motohisa Ikeda, who said he was worried about the impact
of a rising yen on the country's exports. [ID:nTFD006497]
[ID:nTFD006498]
                                
 Market players have said they will not seriously expect
Japanese authorities to intervene to stem the yen's rise until
the yen rises to 15-year highs beyond 84.82 yen to the dollar,
and that the yen's rise would also need to gain more steam and a
slide in Tokyo shares would have to deepen. [ID:nTOE66K03M]
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 For a graphic on dollar/yen click on:
                                
                          http://link.reuters.com/fyp42n
                                
 For Insider programme on Risk FX:
                                
                          http://link.reuters.com/geq42n
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 The yen rose broadly, with traders citing speculation about
the potential for fund repatriation flows into the yen related to
redemptions of Spanish bonds. [ID:nLDE66M1PR]
                                
 There was also some market talk that Japanese retail margin
traders were buying back the yen, or may do so, on Friday ahead
of the implementation of a new leverage cap starting on Aug. 1,
when maximum leverage will be capped at 50 times collateral.
                                
 Any retail investors that have been using higher leverage,
such as 100 times or 200 times collateral, would be forced to
exit their positions if their collateral is found lacking once
the switch to lower leverage is implemented next week.
                                
 But since the bulk of traders using such high leverage are
thought to be day traders that close out their positions during
the day anyway, margin brokers and analysts have said the chances
of large-scale position unwinding emerging next week seem
limited.
                                
 The dollar has been hobbled by worries over the U.S. economy,
after a raft of U.S. economic data in the past month undershot
market expectations.
                                
 St. Louis Federal Reserve Bank President James Bullard said
on Thursday he was worried about the risks that the United States
could fall into a Japan-style quagmire of falling prices and
investment. [ID:nN29267085]
                                
 Although his comments had only a marginal impact on the
currency market, some traders were surprised by the candid tone.
                                
 The euro dipped 0.1 percent to $1.3065 <EUR=>, but was not
far from a 12-week high of $1.3107 hit on Thursday, when data
showed a jump in euro-zone economic sentiment to a 28-month high
and a decline in German unemployment.
                                
 The dollar index <.DXY> stood at 81.577, just a hair above a
three-month low of 81.488 hit on Thursday.
 (Additional reporting by Masayuki Kitano, editing by Charlotte
Cooper)