LONDON — The dollar rose on Thursday after comments by Japanese Finance Minister Yoshihiko Noda about the strong yen stoked speculation about the prospect of some form of intervention by Japan.
In late morning deals, the US unit rose to 85.55 yen from 85.44 yen in New York late Wednesday.
The European single currency eased to 1.2840 dollars from 1.2852 dollars Wednesday.
The dollar turned firmer after Noda reiterated at a regular press briefing that he would closely watch the forex market, signalling his caution over the appreciating yen, which hurts exports, Japan's main economic driver.
"I want to continue cautiously watching" financial markets, he said.
Last week, Noda threatened to take "appropriate action" after the yen jumped to a 15-year high versus the dollar.
The yen's strength has prompted the government to consider further stimulus action while there is speculation that fresh political pressure will be placed on the Bank of Japan to ease monetary policy further.
Prime Minister Naoto Kan is expected to meet Bank of Japan Governor Masaaki Shirakawa Monday to discuss the yen's impact on the economic climate.
The dollar was also lifted by a report in the Sankei Shimbun newspaper that the central bank was mulling additional easing measures to lower interest rates and the yen, dealers said.
Fears that Japan's recovery from recession is fading were heightened by weaker-than-expected data Monday, showing that the economy grew by an annualised 0.4 percent in April-June.
That figure was down from a revised 4.4 percent in the previous three months and missed forecasts of 2.3 percent growth.
"Looking ahead, currency markets have been skittish and fickle of late as investors' outlook for the global economy has swung between optimism and pessimism," Mike Jones, currency strategist at the Bank of New Zealand told Dow Jones Newswires.
"Growing speculation that Japanese authorities are ... likely to intervene to quell a rapid appreciation in the yen" should maintain pressure on the currency in coming sessions, he said.
In trading in London, the euro changed hands at 1.2840 dollars against 1.2852 dollars on Wednesday, at 109.85 yen (109.80), 0.8208 pounds (0.8240) and 1.3341 Swiss francs (1.3404).
The dollar stood at 85.55 yen (85.44) and 1.0392 Swiss francs (1.0421).
The pound was at 1.5643 dollars (1.5595).
On the London Bullion Market, the price of gold rose to 1,229.88 dollars an ounce from 1,218 dollars an ounce on Wednesday.
