TOKYO (AFX-ASIA) - The yen was pushed off its highs in midafternoon trading, hit by rumours of rate-checking by the Bank of Japan, dealers said.
Earlier, the yen rallied to as high as 118.80 yen on substantial stop-loss dollar sell orders, which was activated after the Japanese unit broke through major resistances at 120.50 yen and 120.00 yen, they said.
"The breach of these major technical lines, which was considered to be unlikely, exploded latent energy to test the upside of the yen," BankOne NA foreign exchange vice president Masahiro Ishikawa said. The momentum of the yen was curtailed in mid-afternoon trade by speculation about the BoJ action, but Ishikawa said he did not believe the central bank took any action today.
"Today's development had nothing to do with fundamentals, but was driven by technical play," he said, adding that "the euro was the ground zero."
BankOne's Ishikawa said that although there is no fundamental reason to buy the yen any further, the Japanese currency will be exposed to additional upside risk due to technical reasons. "People may not begin to trade the dollar/yen based fundamentals .... until they test the 117-118 yen level," he said.
Dealers said the yen may also resume its appreciation also against the euro, depending on developments in the dollar/yen straight trading.
"If the yen were to gain additional one or two yen (against the dollar), we can not dismiss the possibility of the unit rallying to the double digit zone," Ishikawa said, suggesting that the euro may fall to below the 100 yen level.
The euro was also pushed off its intra-session low of 0.5490 usd due to the yen's downturn against the dollar, dealers said. But the European currency is expected to remain in the falling trend, rather than entering a recovery phase, dealers said.
"The market will just be waiting to see if the ECB will carry out intervention anywhere between the 0.84 and 0.85 usd levels," Ishikawa said.