FOREX-Yen selling resumes on Japan official comment; euro up
* Japan's verbal intervention continues
* Euro, dollar rise more than 1 percent against yen
* Sentiment on euro zone assets improving
NEW YORK, Jan 24 (Reuters) - The yen posted steep losses across the board on Thursday after three days of gains, weighed down by Japan's record trade deficit and comments from a Japanese economic official saying the government has no problem with the dollar hitting 100 yen. The euro, meanwhile, rose against the dollar after economic data from Germany indicated that the worst of the euro zone debt crisis may have passed. But it was the yen that drew the most attention. Traders cited reports quoting Japan's Deputy Economy Minister Yasutoshi Nishimura as saying the yen's decline is not over and a dollar/yen level of 100 would not be a concern. Nishimnura added that only if the dollar rises to 110-120 yen would it add to domestic import costs. "(Nishimura) represents another official voice favoring further yen weakness and the remarks probably supported the latest bounce in dollar/yen which began overnight," said Bob Lynch, chief currency strategist, at HSBC in New York. "At some stage, the ability of this jawboning and verbal intervention to drive the yen lower will become subject to diminishing returns, but that does not appear to be the case yet." The dollar was last up 1.4 percent at 89.84 yen, rallying from a one-week low of 88.06 yen hit the previous day. Traders said this move up in dollar/yen could face some resistance ahead of stop-loss sell orders at 90 yen, but if it does break through it could reach 90.25 yen, a 2-1/2 year high hit on Monday. The yen's weakness became further entrenched after Japanese Prime Minister Shinzo Abe said he expected the Bank of Japan to achieve its 2 percent inflation goal as soon as possible.
A record trade deficit for Japan in 2012 of 6.297 trillion yen ($78.24 billion) didn't help the yen's cause either, adding to selling pressure on the currency. The yen had rebounded earlier this week after the Bank of Japan disappointed investors who were expecting an immediate increase in its asset-purchasing programme. Still, the BoJ delivered its most aggressive policy easing yet to snap the economy out of years of stagnation.
EURO GAINS The euro saw choppy trade after flash private sector activity data highlighted the diverging fortunes of the bloc's biggest economies. Weak performance in France was offset by numbers out of Germany showing that its private sector expanded at the fastest rate in a year. Traders said macro funds and asset managers were buying the euro and if data continued to show prospects for the region were improving, the currency could rise further. "The broader euro zone (private sector activity) data shows that the recovery in periphery economies may offset the decline in French production and suggests that the region is starting to generate some positive momentum for growth," said Boris Schlossberg, managing director for FX strategy at BK Asset Management in New York. The euro was up 0.3 percent against the dollar at $1.3355, not far from $1.3404, an 11-month high hit on Jan. 14 that is also acting as near-term resistance. Support was cited at $1.3250, near lows touched on Jan. 11. The euro was up 1.6 percent against the yen at 119.92 yen, inching towards a 20-month high of 120.73 yen hit on Friday. Traders cited Asian central banks as main buyers of the euro as they stepped up yen-selling. Some analysts said the announcement on the size of next week's first repayments of cheap three-year loans taken by banks from the European Central Bank just over a year ago could give the euro a bit of a lift. Banks took more than 1 trillion euros in the LTRO (long-term refinancing operation) loans from the ECB. A Reuters poll showed traders expected about 100 billion to be paid back next week.
Option traders reported strong demand for euro calls - bets that the euro will rise - for expiry on Friday.