Stocks at 20-year lows in Japan as yen starts to fall

A man walks by an electronic graph showing the dollar's fluctuation against the yen as the greenback fell below ?117 in Tokyo yesterday. PHOTO: REUTERS

Japanese sank to fresh 20-year lows yesterday and the dollar dipped as US plans to force a UN vote on Iraq this week suggested war was imminent, keeping oil prices near 12-year highs.

South Korea shares and the won currency slid after North Korea fired an anti-ship missile towards the Sea of Japan, giving investors another reason to seek safety in bonds and gold.

In Japan, the Nikkei stock average fell below 8,000 for the first time since March 1983 as worries about a war exacerbated a seasonal sell-off of stocks by banks and insurers ahead of the financial year-end on March 31.

The Nikkei fell as far 7,975.36 before paring its losses on hopes for government steps to support the market. It closed at 8,042.26, down 1.25 percent -- still its weakest close in two decades.

"With war on the horizon almost everyone is looking to sell," said Haruki Takahashi, head of equities dealing at UFJ Tsubasa Securities.

"We seem to have found support around the 8,000 level today, but I'm worried about tomorrow," he said.

Market action * The Nikkei stock average fell below 8,000 for the first time since March 1983. * The dollar slid back towards a four-year low against the euro and a seven-month low versus the yen. * US light crude oil rose US$0.34 to US$38.12 a barrel on fears war would exacerbate a supply shortage.

US crude oil rose US$0.34 to US$38.12 a barrel on fears war would exacerbate a supply shortage, around US$3 below a record peak struck in October 1990 in the build-up to the Gulf War.

"It's difficult to see oil going lower with the potential of conflict so close. There's really nothing to push prices down very quickly; the risks are all skewed to the upside," said David Thurtell, commodities strategist at Commonwealth Bank in Sydney.

The dollar slid back towards a four-year low against the euro and a seven-month low versus the yen as the diplomatic battle dividing the West intensified, with each side trying to woo wavering Security Council members into its camp before the U.N. vote.

The euro was at US$1.1024, up from US$1.1012 in late US trade and near a four-year high of US$1.1069 hit on Friday.

The dollar was also quoted around ?116.80, down from ?117.07 late on Friday in New York and within a half yen of Friday's seven-month low near ?116.35.

The yen dipped only briefly on news North Korea had fired an anti-ship missile towards the Sea of Japan, but South Korean shares and the won currency stumbled.

Seoul's KOSPI index fell a third of a percent to its lowest close in 16 months. The won hit a four-month low against the dollar.

Gold, a traditional investment in times of trouble, was trading more than US$3 higher at US$353.65 an ounce yesterday after tumbling US$6 on Friday.