RTRS: Dollar slides after Fed; euro rises to 5-month high
* Dollar drops to lowest since Japan intervened last week
* Dollar index falls below 80, lowest in six months
* Euro at 5-month high versus dollar
* Next euro target around $1.3465 - technical analysts
(Adds comments, details, updates prices)
By Vivianne Rodrigues
NEW YORK, Sept 22 (Reuters) - The dollar fell on Wednesday to its lowest level versus the yen since Japan intervened last week, with the dollar index hitting a six-month trough after the Federal Reserve raised expectations of more monetary easing.
Additional stimulus buy the Fed, most likely via the purchase of U.S. Treasury debt, will push benchmark yields even lower and further diminish the return on dollar-denominated assets.
Gains in the euro EUR= accelerated once it broke through option barriers at $1.3350 to a five-month high above $1.3400.
But the market was wary about selling the dollar against the yen too aggressively as it might trigger another wave of intervention by the Japanese authorities that surprised many investors last week.
"The Fed's policy statement was the strongest hint yet that increased policy easing, likely in the form of Treasury bond purchases, will be implemented if upcoming economic indicators continue to point to a recovery that is losing momentum," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington.
In morning trading in New York, the dollar was down 0.7 percent against the yen at 84.42 JPY=, a session low, according to Reuters data. It touched 82.87 yen on EBS trading platform on Wednesday before Japanese authorities intervened to send it three yen higher in a day.
"Sellers of dollar/yen will have to be very nimble as intervention risks are very high. We would expect the Japanese to intervene once the price action gets too one-sided," said Paul Mackel, director of currency strategy at HSBC Markets.
Traders said Japan may step in between 83.00 and 85.00 yen. They said authorities had called banks to ask if they will be staffed on Thursday, a Japanese national holiday, in an apparent attempt to keep traders cautious over intervention.
"I think they will intervene if the dollar falls to 84 yen or below," said Tom Levinson, FX strategist at ING. "Dollar/yen is pretty sensitive to the fall in U.S. yields, so it looks like pressure will be back on the Japanese authorities to intervene."
