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Yen moves higher against US dollar

The yen gained against the dollar on Friday and had its biggest climb in two months against the euro after Japanese stocks surged, increasing demand for the currency needed to buy shares.

The Nikkei 225 stock average rose to a one-month high in Japan's first day of trading after the holidays, following rallies in other major stock markets. Analysts said expectations the government will stop advocating a weaker currency to boost exports also spurred demand for the yen, which dropped 6.2 percent against the dollar last month. In comments on Friday, Japanese officials "did not sound as enthusiastic as they had before about yen weakness, and with the rally in the Nikkei there are ingredients that could provide" support for the currency, said Paul Podolsky, chief currency strategist at Fleet Global Markets in Boston.

The Japanese yen strengthened to ?130.98 per dollar, up from ?131.80 late yesterday in New York. It's little changed for the week after rebounding from a three-year low of ?132.26 touched Wednesday. The yen climbed to ?117.25 per euro, from ?118.50, still down 1 percent since last Friday for an eighth weekly drop.

Gains for the currency today came as the Nikkei -- which fell to an 18-year low in September -- rose 3.1 percent, adding to a 3.4 percent gain in the previous two sessions.

"The stock gains have helped the yen," said Rowan Chaplin, who oversees about US$1.4 billion of Japanese investments at Friends Ivory & Sime Plc in London. "People are putting some money into Japan -- there is some optimism about technology shares." The yen fell 13 percent against the dollar and 8 percent against the euro last year on concern Japan's third recession in a decade was deepening. The currency's drop accelerated as comments from authorities suggested they favored a weaker yen to bolster exports at a time when most other policy options -- such as debt sales and interest-rate reductions -- have been exhausted.

The yen's slump has threatened exporters in China, South Korea and other Asian countries, whose goods become less competitive as the yen weakens. South Korean Finance Minister Jin Nyum said Wednesday the move has hurt other Asian economies and may delay a rebound in global growth.

Investors have speculated that Japanese officials will try to slow the yen's drop in response to the complaints.

Zembei Mizoguchi, director-general of the Ministry of Finance's international bureau, said the government will continue to closely watch the currency market, Dow Jones Newswire reported.

Haruhiko Kuroda, vice finance minister for international affairs, declined to comment on the slide of the yen.

"The Ministry of Finance was noticeably quiet today" regarding the yen's level, said Robert Sinche, head of global currency strategy at Citibank.

The magnitude of the yen's decline in the past few weeks "may have been be a little exaggerated due to a lack of liquidity" as a result of less-than-usual trading over the holiday period, said Vincent Palazzolo, chief trader at Sumitomo Mitsui Banking Corp. "We've been expecting that once the market comes back to full strength" the yen would rebound briefly, he said.

Many traders, analysts and investors expect the yen will resume its slide in coming months as the second-largest economy falls deeper into recession.
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