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Tokyo - The yen edged up Tuesday ahead a G7 meeting where currencies will be high on the agenda following Japan's threat to intervene in forex markets to tame the surging unit.
Finance ministers and central bankers from the Group of Seven countries hold a two-day meeting from Thursday in northern Japan, with US President Barack Obama and other G7 leaders attending a separate summit between Tokyo and Osaka next week.
Competitive currency devaluations will be the most pressing topics at this week's meeting, after Japanese officials said they might wade into markets to stem the yen's recent rise to 18-month highs against the dollar.
That could breach a G20 agreement not to unilaterally devalue currencies to gain economic advantage.
But analysts said Tokyo was unlikely to step into markets imminently, owing to diplomatic sensitivities while the yen has given up some of its recent gains.
"The Japanese way would not be to intervene ahead of the G7 (finance minister) meetings or the summit the following week, and volatility isn't all that great," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, told Bloomberg News.
"The US dollar is coming back and that's where it will be for the second half of the second quarter and into the third quarter."
On Tuesday, the dollar edged down to ¥109.01 from ¥109.06 on Monday in New York, but sharply up from the levels around ¥105.50 touched two weeks ago.
The yen, however, has soared more than 10% against the dollar since January as the market turmoil at the start of the year and ongoing worries over the global economy have seen investors rushing for safe bets.
The Japanese unit is considered a safe haven in times of volatility. Receding expectations the US will lift interest rates any time soon, and the Bank of Japan's decision to hold off easing monetary policy, have also provided support.
The euro ticked down to $1.1310 and ¥123.31 from $1.1318 and ¥123.43 in US trade.
A rebound in crude prices boosted demand for riskier emerging currencies, with the oil-linked Malaysian ringgit tacking on 0.3% against the dollar and the South Korean won advancing 0.5%.
The Indonesian rupiah, Thai baht and Taiwan's dollar also booked healthy gains.
The commodity-linked Australian dollar jumped 0.8% after minutes from the last meeting of the country's central bank suggested policymakers will hold off on cutting borrowing costs further.
The bank cut interest rates 25 basis points to a historic low of 1.75% this month, following lower than expected inflation, sending the currency tumbling.
