Japanese stocks jump after yen intervention

[September 15, 2010]  LONDON (AP) -- Japanese stocks jumped Wednesday, outperforming other world markets, after the Bank of Japan intervened in the currency markets for the first time in six years to stem the export-sapping appreciation of the yen.

The yen, which had been trading at 15-year highs against the dollar, was up a massive 2.9 percent on the day to 85.40 yen after the intervention, to the relief of the country's exporters, which were fearing getting priced out of the international marketplace. Before the intervention it had traded as low as 82.87 yen.

Intervention sent the country's big exporters broadly higher -- Toyota Motor Corp. climbed 3.8 percent and Sony Corp. jumped 4.1 percent in Tokyo trade, helping the benchmark Nikkei 225 stock average close up 217.25 points, or 2.3 percent, to 9,516.56. Before the intervention, the Nikkei had been trading lower.

The intervention was unilateral, though authorities around the world were informed about the action.

While the intervention has clearly worked in the near-term, there are doubts whether it can do much in the longer-term to keep a lid on the yen's strength, given the possibility of further monetary easing by the U.S. Federal Reserve, which would likely weigh on the dollar. There are mounting expectations that the Fed will back the purchase of around $1 trillion worth of bonds later this year in another attempt to breathe life into the faltering U.S. economic recovery.

"Whether it proves a successful gambit remains to be seen, but clearly the policymakers felt that the cost of inaction had begun to outweigh the risks of intervention," said Daragh Maher, a currency strategist at Credit Agricole.

The intervention came a day after Prime Minister Naoto Kan held onto power after fending off a challenge from veteran lawmaker Ichiro Ozawa for the ruling party presidency. Ozawa had advocated currency intervention, but Kan had until now been reluctant to act.

Elsewhere, stocks were less in demand, and other currency rates not involving the yen were little changed -- the euro for example was flat on the day at $1.2985.

In Europe, the FTSE 100 index of leading British shares was down 6.46 points, or 0.1 percent, at 5,560.95 while Germany's DAX fell 13.40 points, or 0.2 percent, to 6,262.01. The CAC-40 in France was 2.99 points, or 0.1 percent, lower at 3,771.41.

In Asia, Hong Kong's Hang Seng index added 0.1 percent to 21,725.64, South Korea's Kospi rose 0.5 percent to 1,823.88, and Australia's S&P/ASX 200 added 0.8 percent to 4,661.50. The Shanghai Composite Index retreated 1.3 percent to 2,652.50.

Wall Street was poised for a flat opening. Dow futures were unchanged at 10,463 while the broader Standard & Poor's 500 futures were down less than 0.1 percent at 1,115.30.

On Tuesday, U.S. shares ended modestly lower -- investors are awaiting further economic news over the rest of the week to see if the recent improvement in the data continues. A manufacturing survey of conditions around the New York region, called the Empire State survey, may well take the spotlight later.

The past week's run of better than anticipated U.S. economic data has helped stocks around the world rally.

Oil prices fell, with benchmark crude for October delivery was down 66 cents at $76.14 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

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