* Yen drops from 2-mth peak vs euro
* Investors bargain-hunt but caution on intervention grows
* Australia-China coal shipment row casts shadow over Aussie
By Rika Otsuka
TOKYO, July 9 (Reuters) - The yen slid on Thursday, falling
from a five-month high against the dollar and a two-month peak
versus the euro hit the previous day when doubts about the health
of the global economy spurred risk aversion.
The dollar and the euro both fell more than 2 percent against
the yen on Wednesday, posting their sharpest one-day drops since
March, according to data from trading platform EBS.
In recent weeks, optimism about the global economy's recovery
prospects has started to wane, prompting investors to trim
holdings of riskier assets such as stocks while seeking the
safety of government debt.
Dealers said the dollar's fall had been exacerbated by
automatic sell orders triggered around 94.00 yen and loss cutting
on options positions near 93.00. As the dollar fell below those
levels, liquidity dried up, steepening the plunge.
But the dollar and other major currencies found some support
on Thursday as Japanese importers and investors, including retail
investors, hunted bargains in foreign currencies.
"Japanese players bought back overseas currencies because few
fear a meltdown in the global economy as they did earlier in the
year," said Tsutomu Soma, a senior manager of foreign securities
at Okasan Securities.
"It is true that investors are less optimistic, especially
after last week's U.S. jobs data," Soma said. "But even so, their
views on the global economy are not as bad as recent abrupt moves
in exchange rates might suggest."
The dollar rose 0.3 percent from late U.S. trade to 93.15 yen
<JPY=>. It hit a five-month trough of 91.80 on EBS the previous
day.
The euro climbed 0.4 percent to 129.50 yen <EURJPY=R> after
falling as low as 127.00 yen on Wednesday, its lowest since
mid-May.
The euro was up 0.1 percent at $1.3901 <EUR=>.
Speculators betting that a recent pullback in risky assets
could provide the impetus for a further rise in the yen were also
behind this week's hefty losses in dollar/yen and cross/yen.
"The dollar remains vulnerable as U.S. Treasury yields slid
yesterday, narrowing the dollar's yield advantage over the yen,"
said Minoru Shioiri, a senior manager of forex trading at
Mitsubishi UFJ Securities.
"But the greenback is unlikely to plunge against the yen
during Tokyo trade as those who needed to cut long dollar
positions have already dumped enough dollars."
Market participants were increasingly cautious about possible
market intervention by Japanese authorities to fight the
currency's rapid rise, which hurts Japanese exporters by eating
into profits made overseas when the profits are repatriated.
Japan's top government spokesman said on Thursday excessive
currency moves are undesirable as they would hurt the stability
of Japan's economy and financial markets. []
But few expect immediate action by Japanese authorities as
the yen is still far away from this year's peak against the
dollar, traders said.
In January, the dollar fell to near 87 yen, its weakest since
July 1995, as a massive unwinding of risky yen carry trades
occurred at the height of the global financial crisis.
Analysts said intervention by Japanese authorities is
unlikely to happen at the moment as Tokyo's Nikkei stock average
<> is still well above its a 26-year closing low hit just
above the 7,000 level in March.
"If the stronger yen pushed down the Nikkei remarkably then
they would become worried about the yen's move especially if the
Nikkei falls to the recent lows," said Masafumi Yamamoto, head of
FX strategy Japan at Royal Bank of Scotland. "But it's not the
time yet."
The Nikkei closed down 1.4 percent at 9,291.06.
Investor fears about China's demand for Australian resources
cast a shadow over the Australian dollar after a report said a
Chinese customer had cancelled a shipment of Australian coal
while it was at sea. []
The Australian dollar eased 0.2 percent to $0.7785 <AUD=D4>,
with a subdued reaction to Thursday's data showing the Australian
labour market was not weakening at a faster pace. [].
It fell more than 1 percent against the dollar on Wednesday and
3.5 percent against the yen.
Sterling rose 0.2 percent to $1.6090 <GBP=D4>, staying above
a one-month trough of $1.5983 hit the previous day when it fell
0.5 percent, according to Reuters data.
The Bank of England is widely expected to leave interest
rates unchanged at the current 0.5 percent level as it concludes
its two-day policy meeting later in the day. []
(Editing by Joseph Radford)
