By Toma Mochizuki,
The U.S. dollar was firmer against the yen but remained top-heavy in the upper 156 yen range on Tuesday in Tokyo, as fears of intervention strengthened a day after Japanese authorities are suspected to have stepped in to stem the yen's slide.
Market players tested the dollar's upside toward 157.00 yen despite wariness over intervention, given their expectations that the U.S.-Japan interest rate gap will remain wide, dealers said.
At 5 p.m., the dollar fetched 156.85-87 yen compared with 156.30-40 yen in New York at 5 p.m. Monday.
The euro was quoted at $1.0704-0706 and 167.90-94 yen against $1.0716-0726 and 167.33-43 yen in New York late Monday afternoon.
Japan's benchmark 10-year government bond yield fell 0.050 percentage point from Friday's close to 0.870 percent, after the Bank of Japan maintained its bond-buying operations at its policy meeting Friday.
Financial markets in Tokyo were closed Monday for a national holiday.
Fears of intervention and the U.S. Federal Reserve's two-day policy meeting ending Wednesday left market participants reluctant to chase the U.S. currency's upside aggressively, dealers said
The dollar on Monday topped the 160 yen threshold for the first time since April 1990 but then fell sharply back to as low as the 154 yen level.
Some market participants suspect the yen's sharp rebound indicates Japanese authorities conducted a yen-buying, dollar-selling operation to halt the yen's decline.
Masato Kanda, vice finance minister for international affairs, declined to comment on intervention on Monday, repeating that the Japanese government stands ready to act whenever "appropriate."
The yen's moves have been excessive and led by speculators, Kanda said.
The comments and the suspected intervention bolstered market expectation that the authorities could step in if any volatile and speculative moves are seen in the market, dealers said.
"Investors believe that another intervention is likely to happen soon, as the trend for a weaker yen cannot be reversed by stepping in just once," said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities Co.
Even if intervention helped the yen rebound substantially on Monday, the effect will likely be limited compared with the result of the Fed's meeting, dealers said.
"The dollar is likely to strengthen further if (its chair Jerome) Powell expresses hawkish views, such as the possibility of raising interest rates," Ishizuki said.
On the stock market, the Nikkei index briefly rose over 600 points, supported by overnight gains on Wall Street and the yen's weaker tone against the dollar.
The 225-issue Nikkei Stock Average ended up 470.90 points, or 1.24 percent, from Friday at 38,405.66. The broader Topix index finished 56.69 points, or 2.11 percent, higher at 2,743.17.
On the top-tier Prime Market, gainers were led by marine transportation, rubber product and machinery issues.
"The yen's ongoing depreciation after the suspected intervention the previous day pushed up export-oriented issues, such as automakers," said Maki Sawada, a strategist in the Investment Content Department of Nomura Securities Co.
Stronger-than-expected March industrial output also helped lift machinery issues.
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