2013.04.1707:18:40UTC+00Yen comes under pressure as gold jitters ease

Japanese yen fell after gold prices steadied somewhat from an eye-watering plunge earlier in the week. The dollar was changing hands at about 98.32 yen, up 0.8 percent from late U.S. trade on Tuesday but still down about 1.6 percent from a four-year high of 99.95 yen set last week.

The euro climbed 0.8 percent to 129.51 yen, although it still remained some way off a three-year peak of 131.10 yen hit last week. A historic 9 percent plunge in gold prices on Monday, coupled with concerns about China's economic growth had sapped risk sentiment and helped the yen regain a bit of the ground lost in a tide of selling this month sparked by the Bank of Japan's aggressive stimulus program.

"We still believe that the recent volatility in the commodity prices was mainly driven by long position liquidation, while the underlying backdrop remains risk-positive due to expanding global monetary easing," said Vassili Serebriakov, strategist at BNP Paribas.

The Bank of Japan's radical monetary policy overhaul will pump about $1.4 trillion into the economy in less than two years, via a souped-up bond-buying scheme that is expected to drive Japanese investors to look overseas in search of better yields.

"We see renewed USD/JPY gains driven by Japanese investor outflows, targeting USD/JPY at 105 by year-end," said Serebriakov.

A trader for a Japanese bank in Bangkok said there was talk of dollar-buying against the yen by Japanese importers and model funds on Wednesday.

But some say it would not be a surprise to see the dollar retreat versus the yen in the next two to three months, given its 28 percent gain since hitting a low of 77.79 yen struck last October. Momentum for a weaker yen gained in mid-November when Japan's current prime minister began calling for aggressive easing as part of his election campaign.

"It's just natural that we see a retracement," said James Brodie, CIO of the Sherpa Funds Pte Ltd, a small G10-focused hedge fund in Singapore that engages in fully automated, program trading.

He said a possible downside target for the dollar is the 38.2 percent retracement of its rise from its 2011 low to last week's high. That retracement level is about 90.55 yen.

In the near-term, the market will be focused on the Group of 20 meeting beginning on Thursday in Washington, where finance ministers and central bankers from the world's leading economies will discuss the economic and financial market outlook, including the Cyprus crisis and asset price reactions.

It seems unlikely that Japan will face any significant criticism over the Bank of Japan's aggressive monetary easing at the G20 meeting, said Mitul Kotecha, Hong Kong-based head of foreign exchange strategy for Credit Agriole.

"Although there may be some warnings about not focusing on exchange rate levels, etc. I don't think there is going to be anything categoric to put pressure on Japan to change its monetary policy," Kotecha said.

A senior Canadian financial official said on Tuesday that Canada was supportive of Japan's effort to kick-start its economy and that the G20 believed policy should target domestic economies and not exchange rates.

The euro held steady against the dollar at $1.3172, after having hit a seven-week high of $1.3202 on Tuesday, partly helped by its bounce versus the yen.

The single currency had added to its gains on Tuesday after breaching resistance at its 100-day moving average at roughly $1.3155, a level which could now act as support for the euro.