* Yen weakens broadly as market wary of more G7 action
* Volatility in yen falls after last week's intervention
* Euro rises above $1.42, highest since November
(Adds quote, detail, updates prices)
By Wanfeng Zhou
NEW YORK, March 21 (Reuters) - The yen fell against the
dollar for a second straight day on Monday, with investors wary
of more central bank selling to weaken the Japanese currency,
though markets could test authorities' resolve by pushing the
pair back toward the 80 level.
Traders said Friday's coordinated invention by the world's
major central banks -- the first such move since 2000 -- had
been successful for now, as the dollar stabilized around 81 yen
and yen volatility retreated from recent highs.
In the near term, analysts said the 80 to 80.85 area could
serve as a floor for the dollar against the yen, and a fall
below could see renewed intervention by central banks. On the
upside, resistance is seen around 82 yen, the post-intervention
high set on Friday.
"The market is certainly very wary about central banks
being on the sidelines," said Dean Popplewell, chief currency
strategist at OANDA in Toronto.
"The market is also questioning who would be intervening if
the yen does start to appreciate, whether it will be the Bank
of Japan on its own or it will be another coordinated
intervention. But at the moment, nobody is willing to test the
waters," he added.
The dollar last traded up 0.7 percent at 81.11 yen
<JPY=EBS>, moving further away from a record low of 76.25 yen
set on trading platform EBS last week.
Traders said the pair was boosted by demand from
model-generated trading accounts, while offers were seen at
81.30/50 and 82.00. Strong resistance lies around 84 yen, a
level that will attract offers from Japanese exporters.
Jon Wetreich, currency strategist at Brown Brothers
Harriman in New York, said the dollar/yen will trade in a range
of 80.50 to 82.
"Markets tend to test intervention levels and central bank
commitment, and thus we expect a test of at least the 80.50
level this week," he said.
Traders and analysts say the Bank of Japan, the European
Central Bank and Bank of Canada together conducted around $32.3
billion worth of yen-selling intervention Friday. Nomura
estimates the Federal Reserve spent about $1 billion. Estimates
for the Bank of England were not immediately available.
Barclays Capital in a note said that "Japan can sell as
much as it desires, as there is potentially no limitation on
selling its own currency." For the other G7 countries, the firm
said they have more than $53 billion in yen reserves, which
"appears sufficient for a while at face value."
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Yen in forex reserves http://link.reuters.com/rah68r
G7 intervention http://link.reuters.com/sub68r
G7 cenbanks launch intervention: []
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RETURN OF CARRY TRADES?
Stocks rallied in part on a glimmer of hope about Japan's
nuclear crisis following a massive earthquake 10 days ago,
further encouraging investors to wade back into riskier assets,
which often involves selling yen to finance purchases.
Intervention has succeeded in bringing down implied
volatility on dollar/yen, with one-month <JPY1MO=> trading at
around 12 percent, well off about 21 percent Thursday.
The yen also fell against other major currencies. The euro
was last up 0.7 percent at 115.10 yen <EURJPY=R>. The
Australian dollar rose 1.3 percent <AUDJPY=R> and the Canadian
dollar advanced 1.2 percent versus the yen <CADJPY=R>.
Analysts said positive risk appetite, expectations that
Japanese money market rates will remain low and the Bank of
Japan putting a cap on the yen's rise meant conditions
supported at least some yen-funded carry trades.
"Carry trades can be put back on, but in places where
yields are more likely to rise and where there's more value,
such as Canada, Scandinavia or even the euro," said Adrian
Schmidt, currency analyst at Lloyds Banking Group.
The euro was last slightly up at $1.4191 <EUR=EBS> after
rising to $1.4204 on EBS, a 4-1/2-month high. Expectations the
European Central Bank will lift interest rates at its next
meeting in April have supported the euro.
Against a basket of currencies, the dollar fell to 75.465
<.DXY>, its lowest level since December 2009.
(Editing by James Dalgleish)
