TOKYO (AFX-ASIA) - The yen fell and then recovered losses against the dollar after Moody's Investors Service announced it has cut its sovereign debt rating for Japan to A2 from AA3, dealers said. "The rating action had some 0.5 yen impact on the yen, but most of the impact has waned by now," said Takashi Toyohara, foreign exchange manager at Nomura Securities Co Ltd. "Everybody has already become bored of this topic." Toyohara noted that most foreign investors appeared to have already adjusted their holdings of Japanese bonds and so the official announcement by Moody's of the rating downgrade is unlikely to trigger fresh selling of Japanese government bonds or the yen. Toshikazu Shimamura, foreign exchange manager at North Pacific Bank, however, said the rating action may have some adverse impact on yen sentiment among longer term investors. "The very fact that the rating on Japan is now in the single A bracket is quite shocking, and may discourage foreign investors from investing in Japan," he said. "In the near-term, Japanese investors are likely to remain willing to buy any portion of bonds to be sold by foreign investors." Dealers said the dollar is expected to maintain a weakening bias in the near-term due to widespread concerns regarding the performance of the US economy and capital markets. "Unless pessimism over the US is fully dispelled, the dollar is not likely to be able to attract strong enough buying interest to absorb selling pressure by Japanese exporters," Shiamamura said. "Japanese exporters seem to be lowering the targeted level for selling the dollar because of its extremely top-heavy performance of late." Nomura's Toyohara said technical factors suggest the market is now looking at the 122.50 yen level as the next downside target for the dollar, adding that "if this level is broken, the currency may be pushed to around or below the 120 yen level". North Pacific's Shimamura said receding fears Japanese authorities will intervene directly in the market could put additional downward pressure on the dollar. "As long as there are substantial (dollar) selling orders from exporters, any intervention is not likely to have a strong impact and it seems the authority is well aware of such supply and demand conditions," Shimamura said.