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Written by: Staff
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TOKYO, Apr 25 (Reuters) The dollar inched towards a fresh three-month low against the yen on Tuesday, extending losses made the previous day after finance officials around the world cranked up pressure on China to revalue the yuan.

The U.S. currency dropped on Monday to 114.24 yen, its lowest since January, after the Group of Seven economic powers at the weekend called on China and other emerging economies to let their currencies strengthen to alleviate global trade imbalances.

Dollar weakness has been compounded by renewed international concern over the ballooning U.S. trade deficit as well as moves by central banks in Sweden and Qatar to diversify their forex reserves away from the dollar.

These woes come amid expectations the Federal Reserve has nearly ended its two-year run of raising interest rates, a key dollar support since 2004, with traders saying the currency's latest weakness could signal the start of a selling trend.

''Given that the dollar/yen has fallen this far, a rebound to 115 yen seems difficult at this point,'' said Shigeru Komatsu, forex manager at Sumitomo Trust and Banking.

In early Tokyo trade, the dollar was around 114.40 yen.

Traders said the currency received some support from U.S.

banks' buying in the lower 114 yen region, as well as from Japanese importers interested in buying dollars on the cheap around those levels.

Renewed pressure on Beijing to revalue the yuan helped to drive up the yen, which is often considered a proxy for the Chinese currency thanks in part to close trade ties between Japan and China.

European Central Bank President Jean-Claude Trichet followed up the weekend's G7 communique by emphasising on Monday that not only China, but all emerging Asisn economies had to do their bit to help correct global imbalances.

''We must have an increasing dynamism of domestic demand and the orderly and appropriate changes in the exchange rate,'' he said, speaking in New York.

The euro was at $1.2375, not far from a seven-month high of $1.2415 hit on Monday. Market participants said the single European currency would be vulnerable to dollar/yen movements in the near term.

The euro was at 141.50 yen, easing further from a record high of 145.51 yen hit last week.

REUTERS OM RAI0659

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