The yen inched further away from 15-year peaks on Friday as talk swirled that Japan's authorities may soon intervene to curb it, while Asian stocks edged up to claw back some of the week's heavy losses.
After a week of sharp moves in the market on global growth angst, some analysts said steady prices on Friday was a normal snap back from over-sold or over-bought regions.
Yet, they warned in the same breadth the lull may not last, especially given Friday's ream of U.S. data releases. U.S. retail sales, consumer confidence and consumer prices are due later and markets fear disappointment.
The market had probably been pretty oversold although given the sentiment out there and the week we've had, there's a risk things could drift heading into the afternoon, said Cameron Peacock, an equity analyst at IG Markets in Sydney.
The dollar nudged up to 86.02 yen, up from 85.84 in New York, but still in sight of a 15-year trough of 84.72 hit on Wednesday.
Likewise, Asian stocks, which had taken a beating this week, got some reprieve early Friday. The MSCI index for Asian stocks outside Japan <.MIAPJ0000PUS> nudged up 0.25 percent.
For the week however, it was still down 3.2 percent, its worse performance in five weeks.
South Korea's stock index <.KS11> led regional gains, rising 0.5 percent from one-month lows, helped by technology stocks such as LG Electronics <066570.KS>.
Oil prices also snapped back after a week of heavy selling. U.S. crude futures rose to above $76 a barrel having shed 7 percent in the past three sessions.
YEN INTERVENTION NIGH?
Japan's Nikkei average <.N225> was a laggard among Asian stocks with a 0.4 percent drop, no doubt hurt in part by the strong yen, which squeezes Japan's mainstay exporters.
Export powerhouses such as Sony Corp <6758.T> fell 0.7 percent, and Toyota Motor Corp <7203.T> lost 0.5 percent. Honda Motor Co <7267.T> retreated 1.1 percent.
A local report that Prime Minister Naoto Kan and Bank of Japan (BOJ) Governor Masaaki Shirakawa may meet next week to discuss possible action to deal with the strong yen made traders wary of pushing the currency higher for now.
But speculation of how Japanese authorities may intervene raged on. Talk that authorities may choose outright sales of yen for dollars got a boost after the BOJ confirmed on Thursday it had checked currency rates that day.
But some analysts doubted a direct market intervention was on the cards and argued instead the BOJ may opt for more quantitative easing.
The Japanese authorities have no appetite for FX intervention, analysts at JPMorgan said.
Not only do they doubt the efficacy of intervention, but yen-selling would be difficult to justify, given strong G7 rhetoric against currency manipulation, they wrote in a note to clients. It is politically unpopular given the magnitude of the losses on Japan's foreign currency reserve.
(Reporting by Koh Gui Qing; Editing by Kazunori Takada)