TOKYO, Jan 9 - The dollar shot up by more than two yen on Friday to its highest level in almost a month after what appeared to be massive intervention by the Japanese authorities but it quickly lost half of that gain to trade around 107 yen. The dollar -- recently weighed down by concerns over a bulging U.S. current account deficit -- soared to 108.30 yen, its highest level since December 15, from the day's low of 106.18. "I was looking at my screen and turned away to look at stock prices, and when I turned back, it had shot off the board," said Soichi Okuda, senior economist at Sumitomo Corporation. Japan's Ministry of Finance (MOF) declined comment on whether there had been intervention by the Bank of Japan.
By 0640 GMT, the dollar had dropped back to 107.01 yen, suggesting to dealers that the effect of any intervention would continue to be short-lived. Traders said the BOJ initially stepped in to buy dollars at around 106.20 yen and intervened again in heavy amounts after resistance at around 106.50 yen was cleared. Bankers said they then saw stop-loss buying by foreign operators and traders here, which drove the dollar up to 108.30 yen, before exporters and Japanese life insurance companies stepped in to sell the greenback. "It started out with intervention, but with the long weekend coming up, the market repositioned dollar shorts ahead of the U.S. payroll figures. So a lot of it had to do with timing," Okuda said. The euro was pulled up against the yen, hitting 137.70 yen, a level not seen since July 2003. It subsequently fell back to 136.14 yen. The single currency was slightly weaker against the dollar, trading at $1.2720 versus $1.2756 in late New York. One market source said Japan, worried that a strong yen could hurt an export-led recovery in its economy, spent about three trillion yen ($28.25 billion) in intervention on Monday and Tuesday. However, that did not prevent the dollar from hitting a three-year low of 105.90 yen on Wednesday. In 2003, the MOF spent a record 20 trillion yen in intervention.//