* Market wary of possible Japan action on yen
* But current price may restrict action
* Euro boosted by unexpected rise in German Ifo survey
(Adds detail, updates prices)
By Neal Armstrong
LONDON, Aug 25 (Reuters) - The yen pulled back from 15-year highs against the dollar and a nine-year peak versus the euro on Wednesday on speculation Japanese authorities may take active steps to stem the currency's rise.
The euro was also boosted after German Ifo business sentiment unexpectedly rose to a three-year high in August.
Caution on the yen initially stemmed from a Nikkei business daily report saying Japan's Ministry of Finance may consider unilateral yen-selling intervention if speculators drive up the currency. [ID:nN24264334]
Finance Minister Yoshihiko Noda reinforced that view, telling reporters on Wednesday that recent yen moves were one-sided and that Tokyo would respond appropriately when necessary. [ID:nTKU106216]
But some in the market said intervention was unlikely at current levels.
"It's unlikely there would be intervention much above 80 yen," said Ray Farris, chief currency strategist at Credit Suisse in London.
"Price action is not disorderly and the yen is not overvalued by our estimates."
At 0925 GMT, the dollar was trading with gains of around 0.6 percent versus the yen JPY= at 84.60 yen, still within reach of a 15-year low hit on Tuesday of 83.60. Traders reported demand for short-term 85.00 yen option strikes as intervention jitters increased.
The all-time low for dollar/yen, hit in April 1995, is around 75.75 yen.
The yen also slipped against the euro EURJPY=R, which triggered stop-losses back above 107.00 yen to trade with gains of around 1.3 percent at 107.40 yen after falling to a nine-year low at 105.44 on trading platform EBS on Tuesday.
U.S. DEFLATION FEARS
Traders were also closely watching the Nikkei average of Tokyo stocks .N225, which fell more than 2 percent to a 16-month low, calculating that the steeper its losses the more likely Japanese authorities might finally bite the bullet and intervene.
Analysts were sceptical about just how effective any intervention by Japan alone would be.
"We would expect hedge funds to sell into any intervention, given that the USD/JPY move is driven by U.S. deflation fears," currency analysts at ING said in a note to clients.
Dismal housing data on Tuesday escalated concerns about the U.S. economy, prompting a further bout of risk reduction as stocks traded with heavy losses, increasing demand for safe havens such as the yen and the Swiss franc. [ID:nN24249810]
The Swissie rallied to an all-time high versus the euro EURCHF= of 1.2988 francs.
"Risk aversion is up, yields are lower and I think euro/Swiss can continue to come lower. Switzerland's large surplus makes it a safe haven," said Farris at Credit Suisse.
The euro rose versus the dollar EUR= to a session high of $1.2722 after the German Ifo [ID:nBEB004473] survey came in above forecasts. Traders said Middle-East and Swiss supply capped the rally.
Earlier, the currency took a hit after Standard & Poor's downgraded Ireland one notch to AA- and warned the outlook was still negative, fanning worries about euro zone sovereign debt and the banking system. [ID:nN24275188].
(Additional reporting by Kaori Kaneko, editing by John Stonestreet)