/www.fxserver.com/ TOKYO, Feb 18 - The yen spiked higher against a spectrum of currencies on Tuesday, helped by seasonal demand from Japanese investors bringing offshore money back home.
By late morning, the dollar traded at 119.27/32 yen down from 120.13 in late New York trade and at its lowest in nearly two weeks.
The euro also suffered at 128.02/14 yen down from 128.94. Against the dollar, it was flat at $1.0731/36
"There seemed to be quite a bit of Japanese repatriation of recent coupon payments on U.S. Treasuries, and stop-loss sell orders in the dollar around 120.00 yen were tripped on the way," said Hiroyuki Watanabe, manager of foreign exchange at Shinsei Bank.
Others said Japanese investors were also selling U.S. Treasuries and converting the proceeds into yen before the business year ends on March 31, a move seen every year as companies try to dress up their books.
A swathe of selling in the euro/yen cross rate was also cited.
One trader at a Japanese bank said there was big hedge-related buying in the yen from trust banks, notably in euro/yen.
Japanese trust banks were thought to be hedging for the huge chunks of money they have recently piled into foreign assets as alternatives to slumping stocks and slim yields at home.
IRAQ UNCERTAINTY
The morning's flows came as currencies showed a lack of clear direction given uncertainties over a possible U.S.-led war in Iraq. A U.S. holiday on Monday had also left traders in Asia devoid of direction.
Traders said Iraq-related risks remained a worry, but there was little certainty about when there would be an attack -- if at all -- and whether Washington would attack without the support of some its major European allies.
Late on Monday, the 15 leaders of the European Union delivered their first joint warning to Iraq that force could be used as a last resort, but remained split on the key issue of how long to give Baghdad for arms inspections.
Some had speculated that the near-term risks for war in Iraq had receded somewhat after a weekend of anti-war demonstrations around the world, but many also doubted that Washington would back down from its hawkish stance.
Traders said the uncertainties over Iraq could keep currencies bouncing around in familiar ranges in the near-term.
The yen in particular should have problems advancing after a revelation last month that Japanese authorities had intervened discreetly to cap the currency's export-crimping strength.
"With the Iraq conflict looking imminent and all the fiscal levers the United States are going to be using to finance it, I don't think U.S. authorities would object to Japanese intervention," said Daisuke Uno, chief market analyst at Sumitomo and Banking Corp.
Japanese Finance Minister Masajuro Shiokawa said the dollar/yen exchange rate would not be slated for discussion when he meets his U.S. counterpart on the sidelines of a Group of Seven meeting later this week.