SINGAPORE/TOKYO: The dollar fell close to a record low against the yen on Wednesday, pressured by Japanese exporters and stop-loss selling, but later pared its losses in choppy trade as traders grew wary of possible yen-selling intervention.
The dollar dipped to as low as about 76.11 yen at one point on trading platform EBS, nearing a post-World War Two record low of 75.941 yen hit in August.
Strong selling by Japanese exporters into the 0100 GMT Tokyo fix helped trigger stop-loss selling below the previous day's low near 76.35 yen and later below 76.20 yen, and dragged the greenback lower, traders said.
Shortly after hitting its intraday low, the dollar spiked up from around 76.20 yen or so to an intraday high of 76.86 yen in a matter of seconds.
But the dollar later lost some steam, and traders said its spike higher was unlikely to have been caused by any Japanese intervention.
"Market players are probably just wary about the possibility of intervention because of the levels we are at," said a trader for a major Japanese bank in Tokyo.
There was vague talk that British and French names piled into buy the dollar as it spiked higher.
The dollar last stood at 76.34 yen , down 0.2 percent from late US trading on Tuesday.
Earlier, ahead of the sudden spike in dollar/yen, there was talk of large dollar bids between 76.20 yen to 76.00 yen , while stop-loss dollar offers were cited at 75.90 yen, just under the dollar's record low.
The euro held steady at 104.74 yen , not far from a 10-year trough of 103.90 yen struck last week.
Against the dollar, the euro inched up 0.1 percent to $1.3716 , more than a cent above the previous day's low of $1.3593.
The euro had gained a lift on Tuesday due to position squaring ahead of the US Federal Reserve's policy decision on Wednesday.
Greece's pledge to bring forward painful austerity steps also gave the euro a bit of reprieve.
The news seemed to have relieved investors who have been worried about the growing prospect of a Greek default due to the nation's failure to meet the fiscal goals of its bailout. Greece needs to receive by next month an 8 billion euro ($11 billion) aid package to avoid running out of cash.
"(The euro) was a bit oversold and there was a paring in those positions. No one wants to be over committed ahead of the FOMC," said Rob Ryan, foreign exchange and interest rate strategist at BNP Paribas in Singapore.
Markets were now fully focussed on the United States, hoping the Fed would announced further steps to boost the flagging economy.
Analysts expected the Fed to unveil a plan to rebalance the Fed's portfolio to push down longer-term interest rates.
Such a move could push investors into stocks and corporate bonds and away from safe-haven Treasuries.
But any such plan is probably discounted by now and analysts said it may take something bolder to have more than a fleeting effect.
BNP Paribas' Ryan believes that unless money is thrown into the US economy, bringing down 10-year yields by itself is no longer that much of a stimulus.
"It's not going to weaken the dollar further and it's not going to boost risk appetite," he said.
"Eventually, we have to move towards quantitative easing," he said, though he does not expect the Fed to announce such a move on Wednesday.
Copyright Reuters, 2011
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