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FOREX-Yen slides as Japan joins Swiss in fighting strong FX

Published 08/03/2011, 10:57 PM
Updated 08/03/2011, 11:00 PM

* Japan finmin confirms solo intervention

* BOJ to end policy meeting Thursday, day ahead of schedule

* BOJ expected to ease monetary policy-source

* Margin traders cited as active cross/yen sellers (Adds more comments)

By Chikafumi Hodo

TOKYO, Aug 4(Reuters) - The yen slid 2 percent versus the dollar on Thursday as Japan intervened to curb yen strength to support its export-led economy, one day after the Swiss central bank unveiled a shock cut in interest rates to cap a soaring Swiss franc.

Japanese Finance Minister Yoshihiko Noda confirmed that Tokyo had intervened in the currency market, adding that Japan had intervened by itself and that Japan was communicating with other countries on the move.

Noda did not provide details, such as levels and the scale of the intervention, but currency market sources said the Bank of Japan was intervening in the market repeatedly to push down the yen. Recent gains in the yen have sparked fears that it could weigh on the country's economic recovery.

"The BOJ is intervening continuously, lifting the dollar versus the yen. We can see its willingness to keep the dollar above 78 yen," one foreign exchange market source in Tokyo said.

The Bank of Japan said it would end its monetary policy meeting on Thursday, a day ahead of schedule, and a source familiar with the BOJ's thinking said it is expected to ease monetary policy at the policy review.

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The dollar surged 2.2 percent versus the yen to 78.81 yen . The dollar had hit a four-month low of 76.29 yen earlier in the week, close to its record trough of 76.25 yen hit in March.

One resistance level for the dollar lies at 79.50 yen, a 61.8 percent retracement of the dollar's drop from an early July peak near 81.50 yen down to this week's four-month low.

"History suggests that the BOJ action will support USD/JPY for a few days at most but won't alter the overall trend. The Sept. 15, 2010 solo intervention was very large scale but USD/JPY started to reverse within a matter of days," said Sean Callow, senior currency strategist for Westpac Institutional Bank in Sydney.

Japanese retail investors and exporters were detected selling dollars against the yen after the dollar spiked up, dealers said. There was also talk of active selling of the Australian dollar against the yen by Japanese retail margin traders.

The yen-selling intervention took place for the first time since March 18 when the Bank of Japan and other central banks jointly intervened after the yen surged to the record high versus the greenback after the quake.

The dollar has been under pressure against the yen after a series of weak U.S. indicators raised concerns about the U.S. economy's outlook.

The Swiss National Bank on Wednesday announced a shock cut in interest rates and threatened more action to cap a soaring Swiss franc. The SNB said it would cut its target rate to "as close to zero as possible" from an already rock-bottom 0.25 percent, and said it would very significantly increase the supply of francs to the money market over the next few days. (Additional reporting by Masayuki Kitano and Reuters FX analyst Rick Lloyd in Singapore; Editing by Kim Coghill)

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