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NEW YORK (Reuters) - The yen fell on Friday after three days of gains against the U.S. dollar and the euro as a draft statement from the Group of 20 nations did not single out Japan for undertaking policies that have weakened its currency.
That was a signal for investors to keep selling the yen, which has already fallen more than 7 percent this year versus the dollar following losses of 11.3 percent in 2012.
The yen had gained this week on expectations the G20 countries, which are meeting in Moscow, would echo a statement made by the Group of Seven this week and censure Japan for the yen's sliding trend.
"The final communique is not due until Saturday and could change. But for the time being, euro and yen traders have responded positively to what appears to be less constraint on Japan from G20 nations," said Kathy Lien, managing director at BK Asset Management in New York.
In late afternoon trading, the dollar rose 0.8 percent to 93.58 yen after hitting a one-week low of 92.21. It had set a 33-month high of 94.42 yen on Monday, and solid chart support was expected at 92.00.
The dollar has gained 0.9 percent this week versus the yen, strengthening in 13 of the last 14 weeks.
Although the currency pair's moves could be choppy at these levels, Bank of America Merrill Lynch analyst MacNeil Curry said the bullish trend remains intact, at least on technical charts.
He expects a test of 94.12 yen, 94.80 and 95.00 before a larger top emerges. However, a break below 92.17 invalidates all that bullishness, exposing 91.40 and 90.25 yen on the way down.
The yen rose in the overnight session after a Reuters report, citing sources close to the process, said former top financial bureaucrat Toshiro Muto was the front runner to become the next BoJ governor. Prime Minister Shinzo Abe and his advisers have cut the field of final candidates to two or three.
Muto is seen as likely to pursue slightly less radical stimulus measures than some of the other contenders. A decision could come in the next few days, the sources said.
Stephen Jen, managing partner at hedge fund SLJ Macro Partners in London, believes that the next step for dollar/yen is to go even higher, possibly in the 100-110 yen area.
"Japanese policy makers will most likely continue to pursue Abenomics with aggression, but will try to pacify Japan's G7 partners by toning down their verbal interventions," said Jen.
The euro last traded up 0.6 percent against the yen at 124.84 yen after falling to 122.87, its lowest since January 30. It hit a 34-month high of around 127.71 last week.
On the week, the euro posted gains of 0.9 percent.
Yen shorts declined further as of Tuesday, data from the Commodity Futures Trading Commission on Friday showed, given the uncertainty about the G20 meeting at that time. But betting against the yen should pick up again as the G20 decided not to make a big deal about the currency's weakness.
Federal Reserve Chairman Ben Bernanke on Friday said the United States is acting in line with the position of the G7 by using domestic policy tools to boost growth and reduce unemployment.
ECB chief Mario Draghi on Friday also criticized recent "chatter" on currencies and said the euro's exchange rate was in line with long-term averages. Like ECB policymaker Jens Weidmann, who spoke earlier, Draghi resisted pressure from some euro zone politicians to target the euro's exchange rate on the ground that it is overvalued.
The euro remained slightly under pressure against the dollar a day after the release of data showing the euro zone sinking more deeply into recession than forecast. The grim picture is likely to keep alive expectations of an ECB interest rate cut.
Euro zone money market rates are also likely to ease in coming weeks, which should keep the euro well away from its recent high of $1.3711 struck on February 1.
The euro last traded flat at $1.3363.
The Italian election on February 24 and news on the repayments by euro zone banks of loans to the ECB would be the key drivers for the euro in the upcoming week. The expectation is that the bank repayments would be lower than last month and should slow the pace of the decline in the ECB's balance sheet. That should be viewed as euro negative.
U.S. data released on Friday, meanwhile, also helped drive gains in the dollar versus the yen.
Manufacturing got off to a weak start this year as motor vehicle production tumbled, but a rebound in factory activity in New York state this month suggested the decline would be temporary.
Consumers were a bit more upbeat early this month even as they paid more for gasoline and their paychecks were reduced by higher taxes, other data on Friday showed.
Additional reporting by Julie Haviv; Editing by James Dalgleish