FOREX-Yen slips as stocks recover, Fed reassurance sought
* Market seen little changed as Fed meeting looms
* Some expect Bernanke to soothe concerns Fed could exit QE
* Bernanke assurance could provide support for dollar/yen
LONDON, June 17 (Reuters) - The yen fell against the dollar and the euro on Monday as global stocks rebounded, but the Japanese currency may stay near two-month highs until investors get more clarity on the Federal Reserve's ultra-loose policy.
The focus is on what Chairman Ben Bernanke says after the Fed's meeting on Tuesday and Wednesday. Expectations it will start unwinding its bond-buying programme have hit global shares and sparked a rush to the safety of liquid currencies like the yen.
Investors are hoping that Bernanke will reassure the markets that Fed policy will stay accommodative, capping a rise in U.S. bond yields that has prompted many to unwind favourable bets on riskier assets.
Higher-yielding assets have also been the victim of disappointment over Japan's lack of policy moves to ease the volatility in markets there and worries about a China slowdown.
Those factors have led to wild swings in Tokyo shares and forced investors to unwind short yen positions in recent weeks.
"It's a bit difficult to call what Bernanke will say, but our best-case scenario is he will try to soothe bond market volatility, and that should help dollar/yen," said Tom Levinson, currency strategist at ING. "If he is able to do that, dollar/yen should be able to find a base at 93.50 yen."
The dollar rose 1 percent to 95.125 yen, thanks to gains in the Nikkei share average and higher European stocks. It was last trading at 94.80, not far from a two-month low of 93.75 yen. Support is seen at 93.57, which is the 38.2 percent retracement of its September-May rally.
If Bernanke does manage to ease volatility, demand for yen could ebb, traders said. And with the Fed chief likely to reiterate that the U.S. economy will continue to grow, prospects for the dollar in the medium term appear to be bright.
"Fundamentally, the U.S. economic acceleration this summer and the Fed's first steps towards the exit in third-quarter 2013 should lift the dollar through the second half of the year. We see dollar/yen at 110 yen and euro/dollar at $1.20 by year end," Societe Generale said in a note.
In the near term, though, there was a risk that speculators would cut hefty long dollar/short yen bets and book profits.
In the week ended June 11, currency speculators cut their bets against the yen for a third week, data from the U.S. Commodity Futures Trading Commission showed on Friday. Still, net yen short positions remained relatively high at $9.49 billion, suggesting a risk of further short-covering.
"The data suggests yen has strengthened even without big short-covering by U.S. speculators. They could unwind their positions, which can trigger more buying in the yen," said Makoto Noji, senior strategist at SMBC Nikko Securities, Tokyo.
The euro was up 0.7 percent at 126.40 yen, but within sight of a two-month trough of 124.94 hit last week. Against the dollar, it was steady at $1.3335, not far off a 3-1/2-month high of $1.3390 set on Thursday.