SINGAPORE—The U.S. dollar stormed back Monday as Tokyo launched a new round of dollar-buying to weaken the yen.
The Japanese intervention, the first since Aug. 4, came after the dollar fell to a post-World War II low of ¥75.31 in early Asian trading. The dollar jumped to ¥78.09 around 0130 GMT and kept climbing, breaking the ¥79 level an hour later.
The size of the dollar's rise suggests that Tokyo trained considerable firepower on the yen, which had crept higher in recent weeks, prompting Japanese companies to pressure officials to counteract the local currency's strength.
"The sharp, large jump in the dollar-yen would suggest that this was a very large amount," said Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ. Tokyo dealers said the overall amount could eventually rival the more-than ¥4 trillion in yen-selling conducted in August.
Ray Farris, chief strategist for Asia at BNP Paribas, said that it is unclear whether the Japanese government is trying to defend a specific level, and this means the dollar/yen pair will probably creep back lower over the coming days.
"Until they have made clear what their objective is, the market will try to take dollar-yen lower," he said. "If the government wants to continue to be as aggressive as they've been today, we won't see it driven down too rapidly. But my guess is we'll probably see (the U.S. dollar at ¥78) in the next week, if not a bit below that," he said.
The yen moves pulled the euro and Aussie dollar lower against the U.S. dollar, interrupting a rally that pushed them to one-month highs following encouraging news from euro-zone leaders on efforts to resolve Greece's debt crisis.
Unwinding of long euro and Aussie dollar positions against the yen in the wake of the intervention may be driving those currencies lower, said Mr. Farris. But reports over the weekend that Beijing is hesitant to expand its investment in the euro-zone bailout facility are also weighing on the single currency, he added.
The dollar was at ¥79.20 at 0423 GMT. The euro was at $1.4003, down from $1.4171 earlier in the day. The dollar also climbed against the Swiss franc, hitting 0.8731 francs from 0.8636 francs late Friday in New York.
Write to Martin Vaughan at martin.vaughan@dowjones.com
