Surging yen levels as Tokyo hints of intervention

[December 18, 2008]  TOKYO (AP) -- The yen leveled off Thursday morning after a dramatic surge against the dollar in recent days, as Japan warned of possible intervention in the foreign exchange market and ahead of an expected rate cut by the country's central bank.

The pause in the currency's climb came as Tokyo strengthened its language on the possibility of intervening to limit the yen's strength and protect Japanese exporters.

Finance Minister Shoichi Nakagawa told reporters he would "implement appropriate measures" regarding the yen's gains.

"For export manufacturers the acceleration of the strong yen is a negative factor," he said.

A stronger yen hurts Japan's export-based economy as it lowers profits from goods sold abroad. Major manufacturers like Toyota Motor Corp. and Sony Corp., which are also facing slowing demand overseas, have been cutting employees and slashing production.

The government has increasingly hinted of intervention to prop up the dollar, keeping some currency traders on the sidelines.

"We will take appropriate measures, including currency intervention, at the appropriate time," said government spokesman Takeo Kawamura Thursday, according to Kyodo news.

The yen remained near 13-year highs against the greenback, trading at 87.60 yen to the dollar in Tokyo, slightly weaker versus the dollar than overnight trading in New York

Earlier in week the currency was trading above 90 yen, but then on Tuesday the U.S. Federal Reserve cut its benchmark rate to the lowest level on record, a range of zero to 0.25 percent.

The move put interest rates in Japan higher than those in the U.S., and the dollar plunged as investors adjusted by buying the Japanese currency.

The Bank of Japan was due to start a two-day policy meeting Thursday, at which it was widely expected to cut interest rates from the current 0.30 percent.

Analysts expect a cut of between 0.1 and 0.15 percentage point, which would bring Japanese interest rates in line with those in the U.S.

On the stock market Thursday, Japanese shares inched higher. The benchmark Nikkei 225 stock average was up 0.4 percent, or 30.07 points at 8,642.59.

[Associated Press]

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