Hong Kong, Aug. 16 (BridgeNews) - A sharp bounce in dollar/yen helped curb the weakness of the greenback Thursday morning in Asia. The market has become cautious on the downside after Japan's Finance Ministry officials warned the market that the ministry would take appropriate action when necessary.
Dollar/yen rose sharply from near 119.50 to 120.29 at one point with some suspecting central bank intervention, although most were skeptical about it.
After falling from 119.95 to 119.45 in early trade, dollar/yen spiked up to 120.29 on importer buying and aggressive buying from a Japanese city bank.
Bank of Japan intervention was suspected, but unconfirmed. The pair fell back to 119.65 on residual squaring of long positions, but worked its way up to 120.10 from there, supported by importer buying amid caution over the downside.
Japanese Vice Finance Minister for International Affairs Haruhiko Kuroda reportedly said Thursday morning that the yen's strength now does not reflect fundamentals and its rise after the BOJ monetary policy easing on Tuesday is not appropriate.
He reportedly said the ministry will take appropriate steps as needed and closely watches the market situation.
Later, the ministry's International Bureau Chief Zenbei Mizoguchi warned also that yen's current level didn't reflect Japan's fundamentals and that the ministry would take appropriate action if necessary. Japan's ruling Liberal Democratic Party source said it was necessary for the BOJ to introduce an inflation targeting policy, the Nihon Keizai Shimbun reported.
The senior official was also quoted as saying the central bank's decision Tuesday to ease monetary policy further was "a step forward, but was not enough."
Meanwhile, Japanese shares fell as export-oriented high tech and automaker shares weakened on the back of yen's strength. Sentiment was also undermined by losses on Wall Street overnight. The Nikkei 225 fell 250.67 points, or 2.1%, to 11,504.73.
In other currency trading, euro/dollar rose from an early low of 0.9132 to a high of 0.9170 as euro/yen buying from a Japanese name triggered stop-loss orders above 0.9150.
The rally was capped by euro/yen selling near 110.00. The cross rose from 108.85 to 109.99, before easing modestly.