Yen rising as investors trim exposure to carry

The euro was down slightly on the day versus the dollar at $1.3448, while the dollar gained 0.1 percent to 1.2296 Swiss francs. The pan-European FTSEurofirst 300 stock index was down 0.4 percent.

YEN CORRECTION SHORT-LIVED?

The popularity of carry trades -- borrowing funds in low-yielding currencies to buy higher-return assets -- has been a driving factor in the yen's broad slide to a 20-year low versus the New Zealand dollar and a 15-year trough against the pound.

But it is the second time in the past few weeks that Omi has tweaked his usual comments on currencies at a regular news conference, having started to say earlier this month he was watching the market carefully.

Analysts and traders said the Ministry of Finance was unlikely to conduct any yen-buying intervention, and unless it did so further warnings would probably lose their effectiveness.

"At this stage it (yen move) merely looks like an ordinary correction rather than the start of a full scale rout. For the latter to happen there will most likely need to be a more pronounced retrenchment in global equity markets," Mellon Bank head of currency research Ian Gunner said.

Looking ahead, investors will scrutinize U.S. consumer confidence figures for June and new home sales for May, both due at 1400 GMT, for signs of whether problems in the housing market have fed into the wider economy.

Market players are waiting for Thursday when the Federal Reserve will wrap up a two-day policy meeting for pointers towards Fed thinking about the economy's health.

Signs of a rebound in U.S. growth have led many investors to expect the Fed to keep rates at 5.25 percent rather than cutting them, helping the dollar recover from a record low against the euro and a 26-year trough versus the pound both hit in April.