ASIA MARKETS: Intervention Eyed As Yen Rise Hits Japan Exporters
By V. Phani Kumar
The yen's surge to 14-year highs against the U.S. dollar was giving
Japanese stocks a black eye Friday on fears the strong currency will dent the
nation's exporters' repatriated earnings.
What's worse, some analysts expect the yen to rise further -- unless Japanese
authorities make an exception to their recent policy of refraining from directly
intervening in foreign exchange markets, and step in to halt the dollar's slide.
"With plenty of long yen positions out there, intervention to weaken the
currency could be very effective. But one or two shots won't do the trick.
They'd have to adopt a sustained intervention policy, which -- I believe -- they
are not prepared to do," Uwe Parpart, chief Asia strategist at Cantor
Fitzgerald, wrote in emailed comments. "The strong yen probably will need to
burn itself out."
The U.S. dollar reportedly slumped to a low of 84.82 yen for its lowest level
since July 1995. The latest surge comes as the U.S. dollar is increasingly
favored over the yen as the currency for carry trades -- a practice where low-
yielding currencies are sold to purchase risky high-yielding assets.
The U.S. dollar was recently buying 86.32 yen versus 86.70 yen in late
European trading Thursday. The euro fetched 128.49 yen, compared with 134.47 yen
late Thursday.
Shares of exporters, meanwhile, took a beating in Tokyo morning trade. The
current U.S. dollar-yen exchange rate is outside the range of 90 yen to 95 yen
which many Japanese exporters assumed when they made their profit and revenue
forecasts for the fiscal year ending March 31.
Shares of Honda Motor Co. (HMC) dropped 3.8%, Nikon Corp. (NINOY) gave up 5.5%
, Mazda Motor Corp. (MZDAY) lost 4.9%, Sony Corp. (SNE) lost 4.4% and Elpida
Memory Inc. (6665.TO) shrank 3.2%.
The Nikkei 225 Average ended down 3.2% at 9,081.52, Australia's S&P/ASX 200
gave up 2.9%, Hong Kong's Hang Seng Index dropped 4.8%, China's Shanghai
Composite fell 2.4%, Taiwan's Taiex declined 3.2% and South Korea's Kospi shrank
4.7%, while India's Sensex was 1.5% down in afternoon trading.
'Extremely nervous'
The yen's surge came even as Japanese Finance Minister Hirohisa Fujii said at
a press conference Friday that recent foreign exchange rate moves were one-sided
and wouldn't rule out taking steps if they continued. Fujii, according to a
Reuters report, also said he was "extremely nervous and watching the market
carefully."
Fujii also reportedly said he will contact U.S. and European currency
policymakers when necessary, hinting at possible coordinated efforts to prevent
global currencies' slide against the yen.
The comments pared the U.S. dollar's loss but it still stayed weak, with
analysts doubting the comments alone would alter the downtrend for the dollar.
"Unless markets believe there is a real threat of FX intervention by Japan,
the official comments will continue to be ignored," said Mitul Kotecha, head of
global forex strategy at Calyon.
Kotecha noted that in addition to the risk aversion -- which usually leads to
investors paring their yen short sales positions, boosting the currency --
interest rate differentials were also playing a role in pushing the dollar lower
against the yen.
"The U.S./Japan rate differential narrowed sharply to just around 4.5 basis
points from around 100 basis points at the beginning of August. With both
interest rate differentials and risk aversion playing for a stronger Japanese
yen, the strong [yen] bias is set to continue over the short-term.
(END) Dow Jones Newswires
11-27-090458ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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