* Dollar/yen offers cited at Y82.00 and above
* Soured derivative bets add to dlr selling interest-dealer
* Yen restrained by risk of BoJ intervention
* USD under pressure elsewhere, index near 15-month low
By Masayuki Kitano and Naomi Tajitsu
SINGAPORE/HONG KONG, March 22 (Reuters) - The yen edged
higher on Tuesday, and some traders say a massive build-up of
offers to sell dollars may test whether Japanese authorities
have a line in the sand at 80 for the USD/JPY to launch
intervention.
The dollar looked vulnerable on charts following its recent
drop below trendline support against a basket of currencies. The
euro made the most of the dollar's woes, hovering near its
highest in more than four months against the greenback.
Traders said various market players were looking to sell the
dollar against the yen on rallies, with selling interest
particularly strong starting from 82.00 yen -- the dollar's high
against the yen after Friday's joint intervention.
One trader cited dollar offers from investors at 82.00 yen
and above, while a customer dealer at a major Japanese bank said
the amount of dollar offers around the 82-yen and 83-yen area
have increased sharply in the past few days.
The customer dealer said the amount of such dollar offers at
his bank had doubled after a bunch of option triggers were taken
out last Thursday, when the dollar slid to a post-World War Two
record low of 76.25 yen.
That surge in the yen prompted Japan and other Group of
Seven industrialised nations to intervene to sell the yen last
Friday, and investors are bracing for the possibility of further
action if the yen rises again.
"The size (of the offers) is pretty substantial and makes me
wonder if it's really alright for one bank to have so much,"
said the customer dealer for a major Japanese bank in Tokyo.
The same dealer said last week that players including some
Japanese importers and smaller banks were left holding unwanted
dollar longs or pricey dollar longs after option triggers linked
to FX derivatives were struck as the yen soared last Thursday.
Japanese exporters may gradually lower their dollar offers,
given market expectations that authorities are likely aiming to
prevent the dollar from dropping below 80.00 yen rather than
pushing it higher, the customer dealer added.
Yen volatility has eased significantly since late last week,
and some analysts said calmer markets in the coming weeks would
decrease the need for Tokyo to smooth any appreciation in the
Japanese currency, even if the dollar creeps below 80 yen.
"If we get past the end of the financial year (at end-March)
and we're still unclear about the marcoeconomic damage from
Japan's earthquake and dollar/yen slides even more, beyond a
one-month window it will be difficult for the BoJ to do a whole
lot more," said Cliff Tan, Asia FX strategist at Societe
Generale in Hong Kong.
The dollar dipped slightly against the yen compared to late
U.S. trade on Monday and stood at 80.90 yen , near a
session low around 80.85 yen.
The yen was broadly higher on the crosses, with the euro
dipping 0.2 percent to 115.07 yen .
The yen's surge last week was fuelled in part by speculation
that Japanese insurers may repatriate funds from abroad to
secure cash for payments to policyholders, in the wake of the
massive earthquake and tsunami that struck Japan on March 11.
Market players say such repatriation by insurers has not
occurred, and the impact of any such repatriation is unlikely to
be large.
The true scale of Friday's joint intervention is not yet
clear though market estimates put it around $30-35 billion-worth
of yen sales, mostly by the Bank of Japan.
Dollar/yen implied volatility has retreated in the
wake of the surge seen after last week's massive yen selling.
One-month vol was around 11.0-12.0 percent, steadying from a
pullback from around 20 percent on Thursday.
Lower volatility has provided some opportunity to take on
long gamma positions, but traders say the market remains short
gamma, leaving options dealers vulnerable to a renewed drop in
spot dollar/yen.
DXY BELOW TRENDLINE SUPPORT
The euro held steady at $1.4221 , hovering near
Monday's peak around $1.4241 on trading platform EBS, its
highest since November.
Euro bulls eyed the $1.4283 peak from November, but traders
said U.S. funds were looming with offers above that level, which
along with chart resistance was capping the euro's upside.
The U.S. currency struggled broadly, keeping the index
at 75.567, near a 15-month low of 75.340 hit on Monday.
It has broken below 75.631, a low hit after the Federal Reserve
announced a second round of quantitative easing in November.
It was also under trend line support off the 2008, 2009 and
2010 lows and threatening the 2009 trough at 74.170, which some
analysts said suggested a long-term reversal of a bullish trend.
Traders linked the dollar's weakness in part to expectations
the Fed would maintain its super-loose policy for a long time to
come, making it safe to borrow in dollars to fund carry trades.
In contrast, officials at the European Central Bank were
chorusing the dangers of inflation and seemed intent on raising
rates no matter the global uncertainties.
EU leaders also took a step closer to agreeing a new
European Stability Mechanism worth 500 billion euros which would
be able to directly buy government paper .
(Additional reporting by Naomi Tajitsu in Hong Kong)
