LONDON, Mar. 17 (MNI) - Continued risk-on demand into early European trade Wednesday allowed rate to trip a reported option barrier at $1.3800, with follow-through buying then meeting stronger supply which capped move at $1.3818.

Rate eased off highs, consolidating its recent recovery gains back below $1.3800.

Dollar-yen demand by a semi-official Japanese government agency, suggested to be linked to US Treasury buys, has boosted suggestions that the Japanese government may try to engineer a weaker yen by increasing overseas weighting in bonds and equities.

EURO SUMMARY: Opened in early Europe around $1.3782

overnight session contained within a relatively tight range of $1.3759/88 as it pivoted $1.3770 for most of the session. Model demand, along with strong US bank demand for euro-yen, provided the main buoyancy, with offers linked to protection of a reported option barrier at $1.3800 helped to cap ahead of the European open. Early Europe had the barrier in its sights, took rate through the overnight high, triggering the barrier to take it to an early high of $1.3805. Move met take-profit supply, following the pressured move, the dip back shallow and allowed rate to push higher again, with reported system demand into the highs of $1.3818 said to have met decent supply, with reports of strong offers placed between $1.3825/50. Rate eased below $1.3800, met semi-official demand at $1.3785 before easing on to retest the Asian low at $1.5259 as strong sales of euro-sterling weighed. Rate was trading around $1.3785 ahead of NY.

US: Press pick-ups in the US Wednesday, * US PRESS: Fed up with the tight supply of credit, state and local governments across the U.S. are starting to punish big banks, the WSJ reports. State lawmakers in Maryland, Massachusetts, Minnesota and New Mexico have introduced legislation that would funnel more money into small financial institutions, which generally have avoided the brunt of criticism over the industry's reluctance to lend, the paper says.

IMF STRAUSS-KAHN: Global recovery looks better than expected - Global recovery is multi-speed - Must make public debt sustainable again - 'Will be hard' to bring public debt down - Need a better balance of global demand - Should not withdraw stimulus too soon - In deficit countries savings must go up - Surplus nations must boost domestic demand - Banks should hold more, better capital - Chinese renminbi still undervalued - Some currencies are undervalued, especially in Asia

EUROZONE: Reported comments from eurozone officials Wednesday, * ECB DRAGHI: European recovery is fragile. - Need global integrated market for stability, growth * EU BARNIER: Crisis not over yet - I have never believed in self-regulation - Need new rules to manage specualtion, capital flows - Need to re-establish financial system confidence - Hopes fopr a good agreement on new hedge fund rules - Commission working on proposal on 'naked' CDS - Need better regulation of derivatives. * GERMANY MERKEL: Difficult situation in eurozone with Greece - Greece situation not caused by speculators - Greece situation only intensified by speculation - Euro faces its strongest challenge - Quick solidarity not correct solution to Greece - Must address Greece problems at root - No country can be left fully alone in the eurozone - We stand for stability of euro overall - Solution must proceed from Greece - Must change treaty to deal with case like Greece - Nothing can be done on Greece that goes against German national law. - We need possibility for a country to be ejected from euro as a last resort. * GERMANY: Dep.Econmin; FX must not be politically influenced - FX must reflect economic fundamentals - Reject criticism of German export strength - Other EMU states must be more competitive. * ECB WEBER: Flirting with inflation is quite a dangerous thing - Never had problem moving interest rates even when near 0% - For me price stability is key - Nothing worse in terms of social injustice than inflation - Price stability doesn't stand in way of jobs, we support jobs - Agree with those who say should help Greece help itself - Greece put forward credible consolidation plan. - All countries must consolidate their budgets credibly - Greece austerity plan quite substantial.

EUROZONE: Press pick-ups concerning the eurozone Wednesday, * UK PRESS: Germany's finance minister dismissed calls from France and other European partners for more measures to boost domestic demand, and promised "resolute action" to cut his government's record net borrowing requirement, the FT reports. In an uncompromising budget speech to the German Bundestag in Berlin, Wolfgang Schauble set out guidelines for an "exit strategy" from the present path of economic stimulus by gradually reducing excess liquidity and steadily cutting the budget deficit, the paper says.

EUROZONE: Data released in the eurozone Wednesday, * EMU: Total hourly labour costs in the Eurozone slowed to an annual growth rate of 2.2% in the fourth quarter of 2009, its lowest level in over two years and down from the generally expected +2.5% print, Eurostat reported on Wednesday. * EMU: Construction output in the Eurozone fell 2.2% on the month in January, bringing the annual decline to 12.5%, Eurostat reported on Wednesday. * SPAIN: 4Q09 monthly labour costs +2.5% y/y; 3Q09 +3.3% y/y - 4Q09 hourly labour costs +5.1% y/y; 3Q09 +4.2% y/y

YEN SUMMARY: Open Dollar-yen Y90.57 and Y124.87

trading in a Y90.38-Y90.72 range. The pair had tested higher early on as traders looked to take out some stop loss orders placed above Y125.00 in euro-yen, but the rally in both was short lived. Dollar-yen edged up on reported Japanese government agency demand, suggested to be linked to UST buys, ran into decent selling interest around Y90.75 ahead of the bigger offers reported between Y90.80-Y91.00. A number of different accounts are said to have sell interest around these levels notably Japanese exporters who again take advantage of yen weakness coming into the financial year end. Euro-yen also traded to the downside, after the initial spike higher, retreating to Y124.62 level. Traders report mixed interest on the topside with some light stops placed around Y125.25 despite talk of decent supply between Y125.20-35 and again at Y125.50, on the downside bids noted around Y124.50-60 area.

JAPAN: Announcements in Japan Wednesday, * BOJ kept rates at 0.1%, boosts new market operation to Y20 trln. - BOJ says it will encourage decline in longer-term interest rates and repeats the Japanese economy is picking up. - Two board members, Suda and Noda, voted against raising special funding ops.

JAPAN: Reported comments from Japanese officials Wednesday, * SHIRAKAWA: Comments from BOJ Governor - Today's move not targeted at forex. - Credit easing has affected stocks, forex. - Move today amounts to further credit easing. - Move makes BOJ stance clearer. - Additional market ops alone will not boost economy. - Overall econ outlook unchanged, but some upward moves. - Can't do job if distracted by short-term market moves. * SENGOKU: Commments from Strategy Minister Sengoku - Positively welcome BOJ decision - BOJ decision reflects BOJ caution on global financial developments. * HATOYAMA: PM Hatoyama reported saying, - Welcomes BOJ decision * KAMEI: Comments from Japan Banking Minister Kamei, - Government must take stimulus steps. * KURODA: Comments from ADB President and former MOF official Kuroda, saying further efforts needed by BOJ to fight deflation.

JAPAN: Data released in Japan Wednesday, * Japan Jan Tertiary Index +2.9% M/M Vs Dec -0.9% - Jan Tertiary Index -0.8% Y/Y Vs Dec Revised -2.7% - Tertiary Index Posts 1st M/M Rise In 3 Months - Tertiary Index Posts 18th Y/Y Drop In Row * Average monthly total cash earnings per regular employee in Japan fell a revised 0.2% in January (preliminary +0.1%), posting the 20th straight year-on-year drop after -5.9% in December, instead of the first rise in 20 months as reported earlier, data from the Ministry of Health, Labor and Welfare showed. But the revised data still showed a continued improvement in wages: overtime pay turned positive. In inflation adjusted terms, the average total wage rose a revised 1.2% y/y (preliminary +1.6%) in January after slumping by 4.2% in December and posting rare y/y gains in October (+1.0%) and September (+0.6%), when consumer prices fell at a faster pace. It has improved from the record -5.2% in June 2009.

- John Webb London bureau (44 207) 634 1628 jwebb@marketnews.com

Rates in London Trading TIME EURO-USD USD-YEN CABLE EURO-YEN EURO-STG 0600 GMT 1.3782 90.61 1.5210 124.87 0.9061 0700 GMT 1.3790 90.58 1.5245 124.90 0.9045 0800 GMT 1.3795 90.45 1.5245 124.77 0.9048 0900 GMT 1.3776 90.64 1.5225 124.86 0.9048 1000 GMT 1.3775 90.61 1.5342 124.81 0.8978 1100 GMT 1.3794 90.50 1.5357 124.82 0.8982