* Dollar gains vs yen, shorts trimmed
* Fujii comments on intervention help
* Aussie shines on fresh talk of rate hikes
By Charlotte Cooper
TOKYO, Sept 29 (Reuters) - The dollar rose against the yen on
Tuesday as its rebound from an eight-month low prompted investors
to trim short positions and after Japan's finance minister said
intervention was possible in extreme cases.
After backtracking on Monday from remarks suggesting he was
comfortable with recent yen strength, Finance Minister Hirohisa
Fujii spoke again, saying he would not rule out taking action if
currency moves were irregular but that not promoting a weak
currency was the correct policy. [] []
[]
The yen, already on the backfoot early after automatic dollar
buy orders were triggered around 89.80 yen per dollar, weakened
past 90.00 yen <JPY=> but later edged off its lows and analysts
said his comments did not mean Japan's forex policy had changed.
"I don't think Fujii's previous remarks about the
government's discretion towards intervention were a sign of a big
shift in the government's currency policy as Japan has not
intervened in the market for five years," said Osamu Takashima,
chief currency analyst at Bank of Tokyo-Mitsubishi UFJ.
The yen had hit an eight-month high of 88.23 per dollar on
trading platform EBS on Monday but retreated the same day as
Fujii toned down comments that recent dollar/yen moves were not
"abnormal".
Japan has not intervened in the currency markets since 2004
and many market players doubt the new government, led by the
Democratic Party which won elections last month, will depart from
the old administration's stance. []
Traders and analysts say the dollar would have to fall to
January's 13-year low of 87.10 yen to make the market think
seriously about the possibility of intervention but many say a
drop through 85 yen would more likely be needed.
Yasutoshi Nagai, chief economist at Daiwa Securities SMBC,
said the pace of the yen's appreciation would be more of a
decisive factor intervention.
"The government is likely to intervene in the market if
dollar/yen falls 2-3 yen in just one day," Nagai said. "But it
would be nothing more than a so called 'smoothing-operation' and
not one to defend a certain level."
Traders said dollar/yen was also being whipped around by
flows related to the fiscal half-year end in Japan, with dollar
demand from Japanese companies prompting more short-covering by
speculators but with Japanese exporters also selling dollars.
The greenback rose 0.4 percent from late New York levels to
89.97 yen, after forging a high for the day at 90.23. However, it
is down about 3 percent this month.
"After seeing a sharp drop yesterday, the market is in a
corrective mood," said a senior trader for a Japanese brokerage
firm.
The euro also gained on the yen, rising 0.5 percent to 131.68
<EURJPY=R> after dipping to a two-month low of 129.84 on EBS on
Monday. Sterling, which hit a five-month trough of 139.70 yen the
previous day, rose 0.8 percent to 143.52 yen <GBPJPY=R>.
AUSSIE IN SPOTLIGHT
The Australian dollar gained on the U.S. dollar on Monday and
held its ground at $0.8756 <AUD=D4>, not far below a 13-month
high of $0.8790 set last week.
While higher stocks and commodities lent it support at the
margins, the Aussie was buoyed by renewed talk that the Reserve
Bank of Australia (RBA) would start raising rates in November.
That speculation received a shot in the arm after local
central bank watcher Terry McCrann said the RBA is almost certain
to hike rates by 25 basis points each in November and December,
from a record low of 3 percent now. He did not cite any sources.
Based on overnight indexed swaps <RBAWATCH>, investors were
pricing in a 64 percent chance of a 25-basis-point rate hike in
November, and fully pricing a rise in December.
That would make the high-yielding Aussie an even more
attractive bet for investors searching for better returns on the
back of a economic recovery.
The euro <EUR=> edged up 0.2 percent to $1.4645, while the
battered pound <GBP=> rose 0.5 percent to $1.5958 after hitting a
four-month low of $1.5770 on Monday.
The dollar index <.DXY> slipped 0.3 percent to 76.802.
Investors will keep an eye for a raft of economic data from
the United States and Europe.
In the U.S., there is the September consumer confidence
report and a house price update from Case/Shiller for July. In
Europe, euro zone economic confidence reports and the final
estimate of second-quarter UK gross domestic product (GDP) are
due.
(Additional reporting by Satomi Noguchi and Rika Otsuka in TOKYO
and Anirban Nag in SYDNEY)
