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Yen rallies across the board as risk aversion rises

By Nick Olivari

NEW YORK (Reuters) - The yen jumped to a 15-year peak against the dollar on Tuesday on fears the global economy is slowing, testing Japanese authorities' resolve to stem the currency's climb.

The yen's rise accelerated as stop-loss sales were triggered in euro/yen at around 107 yen after the Japanese currency hit a nine-year high versus the euro. Traders cited macro hedge-fund selling of the euro against the dollar.

The U.S. dollar pared losses against the yen after the Nikkei business daily reported the Bank of Japan is considering additional steps to loosen monetary policy. Japan's Ministry of Finance may consider unilateral yen-selling market interventions if speculators drive up the currency, the paper said.

Declines in stock markets and far weaker-than-expected U.S. housing data had already helped buoy the yen and other safe havens such as the Swiss franc.

"The market's obviously on high alert for some form of intervention, but until we see it, the stronger yen trend will remain intact," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. "With U.S. yields where they are, all simple intervention will do is give speculators better levels at which to buy yen."

Japanese Finance Minister Yoshihiko Noda declined to comment on the chance of currency intervention, saying only that recent currency moves were one-sided and disorderly moves could harm the stability of the economy and financial system.

Traders took his comments as a sign the authorities were not yet ready to act to curb yen strength.

The greenback was last trading down 0.9 percent against the yen at 84.32 yen after going to a 15-year low of 83.61, according to Reuters data. It fell to 83.58 yen on electronic trading platform EBS.

Dollar selling accelerated after a report showed sales of previously owned U.S. homes fell to their slowest pace in 15 years during July.

Investors "are buying yen as a hedge against obviously poor economic news in the U.S. right now," said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington. "We think 80 is clearly the next level (in dollar/yen) now."

YEN CROSSES

The euro traded as low as 105.45 yen, according to Reuters data and 105.44 on EBS , its lowest since 2001. It was last at 106.94 yen, down 0.7 percent on the day.

Technical analysts say the euro could be poised for a fall toward 105.00 yen. It bounced off interim support at 105.50 yen, around the low reached in September, 2001.

Against the dollar, the single currency rebounded from a six-week low after the housing data to trade up 0.2 percent at $1.2681 with a session peak of $1.2718.

The euro fell to its lowest against the Swiss franc on Tuesday since the euro's launch in 1999 amid safe haven buying of the Swiss currency.

The euro was down 0.8 percent against the Swiss currency at 1.3064 francs after going as low as 1.3050, according to Reuters data. The low on electronic trading platform EBS was 1.3049 francs.

"The Swiss franc so far has been benefiting as a proxy of the yen as investors search for a safe haven currency which is free to appreciate," said Jonathan Granby of the DailyFX Research Team. "However, the SNB was out yesterday commenting on intervention so that may in time come to weigh on the franc too and traders will be forced to turn to the classic safe haven, the dollar."

(Additional reporting by Steven C Johnson, Wanfeng Zhou and Aleksandra Michalska in New York)

(Reporting by Nick Olivari and Vivianne Rodrigues; Editing by Andrew Hay)

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