TOKYO: The dollar remained under pressure against the yen on Thursday as Japanese shares took another sharp tumble, pushing investors to unwind their dollar-hedges on the Nikkei and head for the safe-haven yen. The greenback last bought 100.80 yen after hitting 100.56 , its lowest since May 10. The fall came a day after it lost 1.2 percent as U.S. Treasury yields toppled from a 13-month high as investors wavered over whether the U.S. Federal Reserve will wind down its monthly bond buying. Trading of the dollar-yen in U.S. trading hours is dominated by investor sentiment on whether a pullback in monetary stimulus is imminent or not. But market participants in Tokyo say that volatility in the Japanese equity and debt markets have a larger impact during Asian trading hours. "It may seem illogical (for the forex market to follow the Nikkei), but a weaker yen led to optimism for stocks before, so right now the Nikkei's retreat has initiated a fall in the dollar-yen too," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo. On Thursday, the dollar-yen held steady even as the Nikkei dropped 3.5 percent by mid-afternoon thanks to dollar bids from importers and pension funds. "My guess is that the trust banks need to buy dollars right now. The pension funds that were buying until the end of March have come back again and are trying to do a kind of price-keeping operation," said a trader at a major Japanese bank. However, it could not stay immune to the Japanese benchmark's slide to 5.2 percent by the close that took it further away from a 5-1/2 week high hit on May 23. Volatility in the bond market has also thrown a spanner in the works for Bank of Japan Governor Haruhiko Kuroda, who said the audacious easing scheme he launched on April 4 was aimed at pushing down rates across the yield curve. Instead, concerns about decreasing liquidity pushed the 10-year Japanese government bond yield to 1 percent last Thursday, its highest in over a year. With rising U.S. Treasury yields keeping it elevated, it hovered stubbornly at 0.900 on Thursday. Some market participants had expected the BOJ's easing would pressure JGB yields and send Japanese investors in search of higher yields abroad. But finance ministry data on Thursday showed they sold 1.117 trillion yen ($11.1 billion) worth of foreign bonds last week, the second straight week of net selling, as they resumed repatriating overseas investments. "Kuroda plays a key role for 'Abenomics', and he has been persistently sticking with the same message since April 4. But market participants are getting frustrated and starting to distrust him - they want him to stabilise the bond market," said Murata of Brown Brothers Harriman. On Thursday, Kuroda said the BOJ will try to stem volatility in the JGB market to push down long-term yields.

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