But dollar some temporary relief, was not expected to halt its bearish trend for long. Rumours of the central bank's intervention, which bankers said may have totalled $1 billion or more, sparked heavy short-covering of the dollar and helped it rally back to as high as 111.80 yen from a low of 108.65 yen earlier.

"It (BoJ) intervened at the right time today and it should continue doing that if the dollar falls below 110 yen again," chief manager of foreign exchange Midland Bank Kazuo Takayama said in an interview with Reuters Pelevision.

"The dollar is seen now, with caution over the intervention to grow strongly below 110," he said. Overnight in New York, the dollar fell to a 28-month low of 108.21 yen, dealers said.

Yen-buying factors, such as rises in Japanese government bond (JGB) yields and pessimism over Wall Street's outlook, than to dollar-buying incentives.

Jitters over the situation in Brazil and worries outlook of the US economy were also depressing the dollar's underlying sentiment, particularly against the yen, they said.

"It's still more likely that the basic yen-buying trend will persist," said Mitsuru Saito, Chief economist of the Treasury section at Sanwa Bank.

"Given the recent rallies in JGB yields there is still strong demand by foreign investors to buy the yen, which should keep the yen supported," Saito said.

In the near term, the market was likely to sit back and assess how determined the BoJ is to continue intervening on behalf of the dollar, dealers said.

The BoJ was thought to have reacted to this by buying dollars for yen, starting from levels below 110 yen in morning Tokyo trade.

A senior official at the ministry of foreign exchange market operations declined to comment on the possible intervention by the BoJ.

But banking sources checked the dollar/yen rate then later bought dollars at levels below 110 yen.

"Looking at the unusual way that the dollar was bidding up when it rose above 109 yen from around 108.70/80 yen and later when it edged decisively to 110 yen, I'M Pretty sure they were bids from the BOJ," a senior

As of 0515 GMT, the dollar stood at 111.36/41 yen.

Bankers said the central bank appeared to have placed dollar bids at several commercial banks that are among eligible agent banks for the BoJ's forex interventions, including two major US Investment banks.

Comments by Japanese finance minister Kiichi Miyazawa also spurred speculation that the BoJ could be intervening secretly.

Miyazawa declined to comment on intervention, saying he "left that up to the specialists within the ministry".

Shinji Yamada, senior manager of international treasury at Fuji Bank, said Tokyo authorities might be trying to keep any intervention quiet as it might be seen as contradicting their widely publicised efforts to promote the yen.

"It seems there is some kind of dilemma among Japanese monetary authorities. They are trying to internationalise the yen, encouraging foreign investors to buy yen assets. For that, it would not be wise to tell the world the upside of the yen is limited from here," be surprised if they (the authorities) would not like to show that they are in the market."