* Yen rockets to 76.25 vs dollar, last at 78.59 <JPY=>
* G7 to meet, traders on guard for yen selling intervention
* Swiss franc buoyed, near record high vs dollar
(Adds quote, detail, updates prices)
By Neal Armstrong
LONDON, March 17 (Reuters) - The yen hovered near a record
high against a broadly weak dollar on Thursday, keeping alive
the risk of official intervention to stem the Japanese
currency's sharp rise.
The dollar slumped to 76.25 yen <JPY=> in early overnight
trade as the nuclear crisis in Japan forced investors to cut
back on carry trades and position for Japanese investors selling
overseas assets to bring home funds.
Japan's current account surplus means at times of risk
aversion, Japanese investors are unlikely to be willing to
recycle yen into risky assets overseas.
Speculators forced the dollar below the previous record of
79.75, triggering a cascade of stop-losses related to exotic
option structures and algorithmic selling of the dollar, sending
the yen surging in illiquid trade between the U.S. closing hours
and the Asian open.
It stood at 78.59 in volatile European morning trade, after
buying by Japanese importers and some retail margin traders
helped dollar/yen claw back briefly on to a 79 handle.
Group of Seven finance leaders and central bankers will
discuss possible steps to calm markets roiled by Japan's crisis
at 2200 GMT on Thursday. []
"The G7 discussion is likely to be about pre-approval of
intervention by the Japanese and some degree of what would need
to happen for joint intervention to be necessary," said Ray
Farris, currency strategist at Credit Suisse.
"If dollar/yen lurches lower again, the Japanese will likely
be first to intervene and if market fails to respond to that and
looks disorderly, we might then get joint intervention," he
said.
Traders said any co-ordinated intervention would be likely
to involve the help of the European Central Bank and the U.S.
Federal Reserve.
Japan's finance minister Yoshihiko Noda blamed speculation
for the yen spike and said he was closely watching markets, a
warning that the Bank of Japan may soon be given the signal to
buy dollars. []
Japan launched a record one-day, $26 billion bout of
dollar-buying intervention in September when a stronger currency
was undermining the Nikkei average <> and threatening to
worsen deflation.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
COLUMN-Look to sell USD/JPY near 80 []
Japan shares fall, funds eye yen []
Q+A on flat forwards []
Japan desperate to cool reactors []
Japan crisis graphics http://r.reuters.com/fyh58r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"This entire move can be pinned down to speculative
positioning rather than any repatriation flows and in the near
term there is definitely a risk that this will continue," said
Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.
"Since it is speculative driven, intervention in this case
should work and clear out some of the long yen positions built."
The cost of hedging against a further yen rise jumped, with
implied volatility on one-month dollar/yen <JPYVOL> trading
close to 20 percent, though still below levels seen at the peak
of the 2008 global financial crisis of around 30 percent.
The yen also flew on the crosses, jumping around 6 big
figures on the Aussie to as far as 74.50 yen <AUDJPY=R>, a
six-month high, before falling back to 77.00 yen.
SWISS FRANC BUOYED
Investors were continuing to favour the safe haven status of
the Swiss franc, which rose to a record high versus the dollar
of 0.8852 franc on trading platform EBS overnight before
steadying in Europe at 0.9000. The Swiss Central Bank kept
interest rates on hold, as widely expected. []
The euro rose to a 2011 high of $1.4052 <EUR=>, levels last
seen in November, after solid demand at a Spanish bond auction
and on the view that euro zone interest rates were likely to
rise soon.
The euro's rally helped push the dollar index down to a four
month low of 75.848 <.DXY>.
(Additional reporting by Anirban Nag; Editing by Ron Askew)
