* Market tests Japan's willingness to intervene
* Dollar/yen on track for fourth monthly gain
* Euro hits record low against Swiss franc
(Adds detail, updates prices)
By Wanfeng Zhou
NEW YORK, Aug 31 (Reuters) - The yen on Tuesday neared a
15-year high against the dollar and was headed for its fourth
monthly rise as investors shrugged off Japan's latest easing
move and bet on yen gains that would again test authorities'
readiness to intervene.
Mounting U.S. economic concerns have kept investors away
from riskier assets and pushed up the safe-haven yen. Analysts
see further gains in the currency, which could eventually
prompt Japan to sell yen in the markets to weaken it for the
first time in more than six years.
Falling global bond yields also boosted the yen's momentum
by encouraging Japanese holders of foreign securities to take
profits and return funds into yen.
"The yen is benefiting from very low yields outside Japan,"
said Daniel Katzive, currency strategist at Credit Suisse in
New York. "Japanese investors need some incentive to take risk
in foreign markets and that incentive is very much reduced when
yields are at these levels."
In midday trading, the dollar was down 0.6 percent at 84.11
yen <JPY=>. It had earlier fallen to 83.96, according to
Reuters data, not far from its 15-year low of 83.58 set on
electronic trading platform EBS last week.
"The yen has a little further to go," said Katzive. "We
think dollar/yen can get down to 82 in the near term."
The euro fell 0.3 percent to 106.83 yen <EURJPY=>.
Japanese Finance Minister Yoshihiko Noda repeated on
Tuesday that the government would take decisive action on
currencies -- usually seen as code for intervention -- when
necessary.
On Monday, the Bank of Japan expanded cheap loans to banks,
a move seen as a symbolic gesture that will do little to halt
the currency's climb.
"The policy action by the BoJ isn't going to change the
market's mood. It would probably take intervention to shake
things up a bit," said Vassili Serebriakov, currency strategist
at Wells Fargo in New York. "But we're not even sure that would
cause a sustained reversal of yen strength."
INTERVENTION RISK
The dollar has fallen 2.7 percent against the yen this
month and is down more than 9 percent this year.
Traders say Japanese authorities are expected to buy the
dollar against the yen if the dollar slides 3-4 yen in one day.
For Q+A on whether Japan will intervene to curb the yen's rise,
click on [].
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PDF on Japan's yen dilemma: http://r.reuters.com/nef47n
Insider segment on the yen with RBS Securities Chief Japan
Economist Junko Nishioka: http://link.reuters.com/rer38n
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Derek Halpenny, analyst at The Bank of Tokyo-Mitsubishi
UFJ, said while "there is a deep reluctance" within the
Japanese government to intervene, "the tepid policy steps taken
by the Japanese authorities yesterday does shift the risk
toward action as yen gains persist."
A raft of U.S. economic releases this week, highlighted by
Friday's nonfarm payrolls report, could push the yen higher,
analysts said, if they show further deterioration in the
economy and weigh on bond yields.
The dollar/yen rate has had a strong correlation in recent
months with the yield gap between the United States and Japan,
and a fall in Treasury yields also weighed on the dollar.
The yen could also face potential buyback pressure in cross
trades such as euro/yen and Aussie/yen, which have attracted
some interest because of their larger yield differentials.
Against the dollar, the euro rose 0.3 percent to $1.2705
<EUR=>, helped in part by strong job numbers from Germany.
[]
The euro slumped to a record low against the safe-haven
Swiss franc, removing barriers at 1.2900 on the way. The euro
fell as low as 1.2878 francs <EURCHF=EBS> on EBS. The dollar
fell to a seven-month low against the Swiss francs <CHF=>.
(Additional reporting by Steven C. Johnson; Editing by Leslie
Adler)
