* Yen gives ground as charts suggest rally overdone
* UAE c.bank action seen providing stability, but minimal
* Japan finmin says no intervention for now - report
* But he also notes he never said intervention was impossible
By Satomi Noguchi
TOKYO, Nov 30 (Reuters) - The dollar fell against other major
currencies on Monday, retreating from sharp gains made last week,
after the United Arab Emirates offered emergency assistance to
banks in Dubai, soothing market fears about a looming debt
default.
The dollar pared some losses after one of two flagship firms
behind Dubai's rapid growth, Nakheel, said it had asked for three
listed Islamic bonds to be suspended from the Nasdaq Dubai until
it could inform the market fully about the outlook for the bonds.
The yen also edged up amid market uncertainty about how to
react. []
But the day's direction for the dollar was still down as
investors pared safety trades taken out late last week on
nervousness about Dubai, with Asian stock markets climbing and
recouping some of last week's sell off.
The yen slipped early as hedge funds sold it to cover short
positions in yen crosses, and as charts suggested the Japanese
currency's steep gains last week that took it to a 14-year peak
versus the dollar had run their course for now.
"The market has been whipped around by news on the Dubai
fallout," said a senior proprietary trader for a Japanese bank.
The dollar index, a gauge of the greenback's performance
against six other major currencies, fell 0.6 percent from late
U.S. trade on Friday to 74.533 <.DXY>, after climbing as much as
1 percent that day and above a 15-month low of 74.170 last week.
The euro rose 0.4 percent to $1.5055 <EUR=>. It trimmed its
gains on the yen to stand just 0.2 percent up at 129.80 yen
<EURJPY=R>, although it was above a seven-month low of 126.95 yen
touched on Friday on trading platform EBS.
The Australian dollar climbed about 1.2 percent to $0.9170
<AUD=D4>.
The U.S. dollar, however, fell 0.4 percent to 86.18 yen
<JPY=> as the Japanese currency edged up later, although the
greenback was still above a 14-year low of 84.82 yen hit on
Friday on EBS.
On the charts, the relative strength index showed the pair
had moved into oversold territory, signalling dollar selling
might be losing a bit of momentum for now, and dollar demand from
Japanese importers at month-end helped it early in the session.
Concerns about Dubai last week sparked unwinding of carry
trades, with investors rushing to buy back the low-yielding
dollar and yen which they had used to buy higher-yielding
currencies and assets such as the Aussie.
The UAE's central bank set up an emergency facility on Sunday
to support bank liquidity in the first policy response to Dubai's
debt woes that threatened to paralyse lending and derail the
global economic recovery. []
But analysts said the UAE efforts were considered the minimum
policy help and this would likely limit the impact.
[]
"The (UAE central bank's) move offers stability to the
market, but it also reflects the seriousness of the problem,"
said Masafumi Yamamoto, chief FX strategist for Japan at Barclays
Capital.
"Given the great amount of uncertainty over how the rescue
will be conducted and the impact on financial firms, the market
continues to be nervous about the Dubai developments."
JAPAN TO INTERVENE?
After the dollar's drop to the 14-year low last week, when
market sources said Japanese authorities had been checking rates
in the market, dealers are trying to gauge if Japan will become
concerned enough to step in to sell yen, as it did earlier in the
decade.
Finance Minister Hirohisa Fujii was quoted by the Mainichi
daily as saying he would not intervene in currency markets and
that now was a time to monitor markets. []
Fujii later commented, however, that he had never said
intervention was impossible. []
Fujii late last week raised the prospect of a Group of Seven
joint statement on currencies to cool the yen's rally, but with
no sign of coordinated intervention market players grew
increasingly sceptical over whether the yen's rise was disorderly
enough to draw a response from the U.S. or Europe.
They said however the chance of unilateral action, if not
joint intervention, may be growing, with more signs Tokyo was
taking the yen's sharp gains as a serious issue that could deepen
deflationary pressure on the economy.
The head of the Bank of Japan, Masaaki Shirakawa, said the
bank would act decisively if financial markets destabilised
again, his strongest hint yet at fresh steps to support markets.
[]
Shirakawa's comment came ahead of an expected meeting with
Prime Minister Yukio Hatoyama this week, and a government
official said he expected one topic would be whether the BOJ is
considering the need for quantitative easing. []
The Japanese government is also expected this week to include
measures to help ease the impact of the yen's rise on the economy
in an extra stimulus budget.
(Editing by Joseph Radford)
((satomi.noguchi@thomsonreuters.com; +81-3-6441-1875; Reuters
Messaging; satomi.noguchi.reuters.com@reuters.net))
