* Greenback may find support at 84.00 yen, then 83.50 yen
* Reported Japan PM comments on FX spark yen selling
* BOJ checks dlr/yen rates in market -sources
By Rika Otsuka
TOKYO, Aug 12 (Reuters) - The dollar dipped on Thursday after
scoring its biggest daily gain for nearly two years against most
major currencies the previous day as concerns about the U.S. and
global economies triggered a wave of unwinding in short dollar
positions.
But the greenback rose to the day's high of around 85.50 yen
from a 15-year trough against the yen marked the day before,
after market sources told Reuters the Bank of Japan checked
exchange rates with banks earlier on Thursday. []
"The talk of the BOJ rate checking prompted players to cover
short dollar positions, although bearish sentiment persists for
the dollar," said an FX trader at a big Japanese brokerage.
The U.S. currency fell as low as 84.72 yen on trading
platform EBS on Wednesday, when it took out option barriers
around 85.00 yen and a November low of 84.82 yen. The currency's
slide was fuelled by a narrowing spread between U.S. and Japanese
government bond yields.
Two-year Treasury yields fell to a fresh all-time low on
Wednesday a day after the Federal Reserve announced a plan to
reinvest the money from maturing mortgage bonds in government
debt to help its economy. []
The euro gained 0.4 percent to $1.2913 <EUR=> as some players
bought back the currency after it dropped more than 2 percent
against the dollar on Wednesday as investors reduced risky
positions.
A rise in euro/yen also supported the single European
currency against the dollar, traders said.
Against the Japanese yen, the euro was up 0.3 percent at
110.07 yen <EURJPY=R> after hitting a one-month low of 109.24 yen
in early Asian trade.
The dollar index, a gauge of the greenback's performance
against six major currencies, was down 0.1 percent on the day at
82.202 <.DXY>, but well above its 200-day moving average, now at
80.898.
On Wednesday, the dollar index soared 2 percent for its
biggest one day rise since October 2008.
The dollar index might have finally reversed its trend after
steadily sliding in the past two months, traders said.
It now has immediate support around the 81.53-81.60 region. A
rise beyond a July 21 high of 83.45 would confirm it has bottomed
out.
INTERVENTION JITTERS
Against the yen, the dollar was little changed from late U.S.
trade at 85.35 yen <JPY=> in choppy and nervous trade. The pair
returned below 85.00 yen, then received a boost from the Reuters
report on the BOJ checking rates.
The dollar was also helped as Jiji news said on Thursday that
Japanese Prime Minister Naoto Kan told his chief cabinet
secretary that the yen's sudden gains are "rough".
[]
The yen's strength, especially against the dollar, has
stirred worries that Japanese authorities could intervene to rein
in gains in the Japanese currency.
A stronger yen is raising alarm among policymakers worried
that it could undermine exporters that have led the economy out
of the global downturn.
Increasing jitters over possible intervention are prompting
players to book profits on the yen's rally, rather than holding
onto yen longs for an extended period, although many still
believe Japanese authorities will not intervene unless there is a
leap of 3-yen in a day against the dollar, traders said.
"Dollar bids that seem to be linked to short-covering in
speculators' short dollar positions keep coming, helping the
market absorb dollar offers," said Mitsuru Sahara, chief manager
of FX derivatives trading at Bank of Tokyo-Mitsubishi UFJ.
A euro zone official told Reuters on Wednesday that European
authorities would not welcome intervention by Japan and joint
intervention by major central banks is not on the cards.
[]
Traders said the dollar may find some support at the
psychologically key 84.00 yen level and 83.50 yen, around its
July 1995 low. The U.S. currency struck an all-time low below 80
yen in April 1995.
(Additional contribution by Reuters analyst Krishna Kumar in
Sydney and Masayuki Kitano in Tokyo; Editing by Joseph Radford)
