The dollar jumped against the yen on Monday in a market wary of Japanese intervention but quickly gave up its gains as traders cited talk that there might have been a miss-hit or technical glitch rather than intervention.
The greenback came under pressure against most other major currencies as the market gears up for the Federal Reserve to step up money printing after its policy meeting on November 2-3.
The dollar rose more than 1% to as high as 81.60 yen after hitting a fresh 15-year low of 80.21 yen in early Monday trade. But the currency pared much of its gains to trade around 80.70 yen, up 0.4% on the day.
A Japanese Ministry of Finance official declined to comment on the sudden move in dollar/yen.
"Everybody was nervous. There's been lots of conflicting information," said a trader at a European bank.
Traders said the market was becoming cautious about intervention as dollar/yen came within a whisker of its post-war record low of 79.75 yen.
Traders said there was also talk in the market of a miss-hit or technical problem as the dollar jumped to 80.70 yen from 80.40 yen around 0000 GMT, which initially led traders to believe that Japanese authorities had intervened.
"I think there was (dollar) buying by people who thought there was intervention," said a trader for a major Japanese bank.
But he said: "Judging from the price action (after that), the market probably doesn't think right now that there has been any intervention."
Japanese authorities intervened to sell yen for the first time since 2004 on September 15, intervening repeatedly through the Asian, European and U.S. trading day to drive the dollar up from a 15-year low.
But most traders think Tokyo has refrained from intervention since then even as Japanese policymakers continue to warn of "decisive actions" on currencies if needed.
While players remained on guard against possible intervention, many traders think such steps are unlikely.
Yunosuke Ikeda, senior FX strategist at Nomura Securities, said the likelihood of intervention is fairly low in particular after the G20 meetings, where countries agreed to shun competitive currency devaluations.
"As long as the dollar/yen's fall is mainly attributable to the weakness of the U.S. dollar, any justification of unilateral Japanese intervention will be very difficult," he said.
Unless dollar/yen falls decisively below 80.00 yen and the yen is appreciating against all other currencies, intervention is unlikely, Ikeda added.
EURO, AUSSIE RISE
The greenback fell against other major currencies, except for the yen, dropping about 0.4% against a basket of six of them.
The dollar index, now standing at 76.95, has major support at around 76.67-70, which hosts its October 25 low as well as the 76.4% retracement of its rebound in mid-October.
The euro climbed 0.2% to $1.3976, while the Australian dollar rose 0.4% to $0.9880 after China's official purchasing managers' index (PMI) for manufacturing beat market expectations and hit a six-month high.
Chinese data helped to lift regional currencies and shares.
"It's a bit like the tail is wagging the dog but recently we've seen the strength in Asian currencies often precedes the dollar's decline against other majors. Today's is one of those days," said Koichi Yoshikawa, head of FX trading at BNP Paribas in Tokyo.
Asian currencies rose against the dollar, with the Korean won leading gains with a 0.7% rise.
The dollar is also broadly under pressure after U.S. Treasury yields dropped again on Friday, ahead of the U.S. Federal Reserve's policy meeting. The yield on U.S. two-year notes fell near a record low.
A recent Reuters poll found that most leading economists expect the Fed to buy between $80 bln and $100 bln in assets per month, with totals ranging widely, from $250 bln to as high as $2 trln.
