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Dollar falls to 15-year low

Tokyo - The dollar fell to a fresh 15-year low against the yen in Tokyo trade Wednesday as risk-averse investors continued to buy the safe-haven Japanese currency on renewed economic jitters.

The dollar sank to ¥83.33 in Tokyo trade Wednesday, its lowest level since May 1995.

The headline index of the Tokyo Stock Exchange was more than 2% down in afternoon trade as the strengthened yen stoked fears for the profits of Japanese exporters.

The dollar regained some ground to fetch ¥83.40 in Tokyo trade, but was still down from ¥83.73 yen in New York Tuesday.

The safe haven yen has strengthened in recent weeks on fears for the US recovery, and investor caution was heightened Wednesday ahead of the US Federal Reserve's Beige Book commentary on the economy.

The yen's gains were also supported by the absence of new measures Tuesday from the Bank of Japan to stem the upward momentum, dealers said, as the central bank signalled it was prepared to take further action if necessary.

"We are aware that Japanese exporters have been significantly affected by the yen's strength," Bank of Japan governor Masaaki Shirakawa said Tuesday.

But Yuji Saito, dealer at Credit Agricole, said Shirakawa failed to engage with markets effectively given the yen's upward momentum.

"Market players are fully aware of the strong yen's advantages and disadvantages without being told by the central bank governor," Saito said.

Japan's Finance Minister Yoshihiko Noda Wednesday continued recent attempts to talk the yen down, and pledged "decisive" steps against its strength when deemed necessary.

But the comment prompted some investors to sell the dollar, joined by Japanese exporters, said a senior dealer at a major bank in Tokyo, demonstrating what little effect verbal interventions are having.

With Tokyo shares sliding, risk aversion sparked a fresh wave of yen buying said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust and Banking Corporation.

"Yen-buying sentiment is likely to continue for the time being amid a lot of uncertainty, including the fragile European financial sector."

Banking stocks slid in Tokyo following overnight falls among US and European peers on renewed concerns about Europe's banking sector, after a report that recent stress-tests on Europe's banks understated debt exposure.

With next week's ruling party leadership election between Prime Minister Naoto Kan and challenger Ichiro Ozawa looming, intervention is increasingly likely, analysts said, despite the limited effect of unilateral action.

"I think the possibility of intervention has grown because Mr Ozawa says he is ready to intervene even if there is no cooperation (from other countries) or any effect," said Saito.

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