The yen strengthened against the dollar for a fourth day in five in Asia after a report showed rising exports widened Japan's trade surplus last month and prompted some brokerages to raise forecasts for economic growth.
The Japanese currency rose after exports gained 1.6 percent from November, capping a record year for overseas sales. The trade surplus widened 9.9 percent last month to a seasonally adjusted ?1.12 trillion (US$10.5 billion) from November, a Ministry of Finance report showed.
"Japan's economic outlook is improving, led by exports," encouraging more capital inflows to the nation, said Shigehiro Kamimura, manager of the market trading department in Tokyo at Resona Bank Ltd, the nation's fifth-largest bank by assets.
The yen traded at ?106.13 against the dollar at 2:01pm in Tokyo from ?106.75 late in New York on Friday. It may rise to ?105 this week, Kamimura said. The Japanese currency also rose to ?133.59 versus the euro from ?134.30.
Seventy percent of the 53 strategists, traders and investors polled Friday from Tokyo to New York said they would buy or hold the yen versus the dollar as Japan's economic recovery after three recessions since 1991 will prompt overseas investors to extend their purchases of Japanese shares.
Merrill Lynch Japan Securities Ltd said it would raise its 0.2 percent estimate for Japan's fourth-quarter gross domestic product growth after today's trade report. Morgan Stanley and JP Morgan Chase & Co said they are considering raising their forecasts.
Japan's Nikkei 225 Stock Average has gained 2.2 percent this year, after rising 24 percent this year, when the benchmark advanced for the first time in four years. It fell as much as 1.7 percent today, led by banks, after the Nihon Keizai Shimbun said UFJ Holdings Inc, Japan's No. 4 lender, may be investigated by regulators for its accounting of bad loans.
"Overseas investors will extend their purchases of Japanese equities," increasing demand for the yen, said Minoru Shioiri, a foreign exchange manager in Tokyo at Mitsubishi Securities Co, a unit of Japan's biggest bank by market value.
"They're bullish as leading companies here are well past the worst."
Foreign investors have been net buyers of Japanese stocks for the nine months through December, according to Ministry of Finance data.
The euro may drop against the dollar, extending its biggest decline in a week marked Friday, on speculation more European officials will urge the US and Japan to address the 12-nation currency's 12-month, 17 percent advance.
The euro was at US$1.2578 from US$1.2582 late in New York on Friday when it dropped 1.1 percent. The euro may drop to US$1.20 within a month, Takei said.
"I hope that the responsibility for Europe, for the US, for Japan and some other countries will be strong enough to take care of a subject which might become dangerous," French Finance Minister Francis Mer said in a televised interview with Bloomberg News at the World Economic Forum in Davos, Switzerland
He called the euro's gains a "very, very touchy issue." The G-7 countries, which are the US, Japan, the UK and Canada as well as euro members Germany, France and Italy, called for more flexible exchange rates at its Sept. 20 meeting in Dubai. Some traders said the countries were seeking a weaker dollar to help the US narrow its current account deficit by promoting exports and making imports more expensive.
The deficit in the US current account, the broadest measure of trade and investment, was US$135 billion in the third quarter, the third-largest ever.
Any gain in the yen may stall on speculation the Bank of Japan, at the behest of the Ministry of Finance, will sell its currency to protect the nation's export-led recovery. Japan, which sold a record ?20.1 trillion last year, may have sold as much as ?8 trillion this month, according to Toru Umemoto, currency strategist in Tokyo at Morgan Stanley Japan Ltd.
Japan's yen sales limited the currency's gains over the past one year to 11 percent, compared with a 17 percent rise for the euro.
Japan's currency may gain beyond ?105 in two weeks as Japan scales back yen sales to heed rising calls from Europe for Asian nations to let their currencies appreciate, said strategists including Junya Tanase, a currency analyst in Tokyo at JP Morgan.
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