TOKYO, Jan 27 - The dollar briefly fell under 106 yen on Tuesday on speculation that the Japanese authorities would refrain from aggressively intervening in the market ahead of a key meeting of the Group of Seven (G7) economic powers. Traders said the market took Japanese Finance Minister Sadakazu Tanigaki's comments that interventions were aimed at smoothing volatility and not at keeping the yen at a certain level as a sign that Japan may hold off from stepping in. "These comments often come out when they (Japan) hold back from intervening," said Tohru Sasaki, chief forex strategist at JP Morgan Chase.
"Since Mr Tanigaki was speaking after the G7D, I think it needs special attention," he said, refering to Monday's meeting of finance officials held in Brussels to prepare for the G7 meeting on February 6-7. Japan could face criticism especially from European ministers about its massive yen-selling intervention, which is seen by some as having accelerated the euro's recent rise, traders said. By 0304 GMT, the dollar was at 106.03/06 yen after dipping to a low of 105.98 yen following Tanigaki's comments. It hit a three-year low of 105.70 yen two weeks ago. The euro was a tad easier at $1.2459/63 compared with the late U.S. level of $1.2466/72. Technical analysts were waiting to see whether the euro breaks an important technical support at $1.2350 and pave the way for a dip towards a one-month low of $1.2334. The single currency stood at 132.15/20 yen , a new one-week low and around one percent down from 134 yen about 24 hours earlier.
"The market is in a mood to test the euro's downside given growing views that European ministers will seek to curb the strong euro at the G7 meeting, which is forcing speculators to sell on rallies," said a senior forex trader at a Canadian bank in Tokyo. Irish Finance Minister Charlie McCreevy said in a statement for delivery before a European Parliament committee: "It was made clear by Eurogroup ministers and the ECB that our long-term strategy does not change: the euro must keep its value over the medium-and long run, in line with economic fundamentals." McCreevy, as well as Dutch Finance Minister Gerrit Zalm, stressed stability and showed concern over excessive exchange rate moves. Traders were also awaiting the Federal Open Market Committee two-day policy meeting, due to kick off later in the day. Many players expect few surprises given that the Federal Reserve has made it clear that strong growth is to be welcomed and need not lead to higher interest rates as long as inflation stays low and the labour market sluggish.//