jpy news

Cross Flows Lend Yen Strength

Monday, 16 October 2006 07:17:16 GMT  |  Terri Belkas, Junior Currency Analyst

USD/JPY tracked gains in Asian trading, despite comments from George Soros who noted that the Yen could weaken more, but thinks authorities prefer to see the currency where it is now. Mr. Soros also added that expectations of any near-term Fed interest rate cuts are misplaced. Sharp declines in EUR/JPY likely contributed to the dip in USD/JPY, as the cross dropped 40 points to 149.20 in a matter of minutes. Meanwhile, Interfax reported overnight that Russia, which holds the world's third-largest foreign currency reserves, may add Yen to its holdings. The Russian central bank's First Deputy Chairman Alexui Ulyukayev said the current percentage of Yen in reserves "is close to zero" and that it may increase to "several percent."  The sole economic release of the session was the notoriously volatile annualized corporate bankruptcies for September, which rose 4.4% from 1.5% the month prior. On a monthly basis, however, the figure dropped 11.9%, highlighting the improvements in the Japanese business sector. This week, markets will also be looking towards the minutes of the September Bank of Japan MPC meeting, along with comments from BOJ Governor Fukui on Thursday. Economic data is estimated to improve, so Yen may finally find the impetus to turn lower. As of 7:13GMT, USD/JPY trades at 119.41, down from Friday’s New York close of 119.58.

Bargain hunting and a weak yen helped push the Japanese stock market up on Monday morning, sending the Nikkei 225 stock average up 1% higher at 16,707.28 by midday, and the broader Topix up 1.1% to 1,646.59. Investors hunting for undervalued stocks boosted companies that had recently dived, sending the Mothers board of smaller growth stock up 2.6% to 1,169.84.  It also helped lift the price of consumer finance stocks, which had been badly damaged recently by a profit warning from Jaccs, previously regarded as a stable stock within an industry facing severe problems. Aiful jumped 4.4% to Y4,270. Jaccs itself was up 4% to Y932. Sony, the consumer electronics and entertainment giant, climbed 2.9% to Y4,900, despite the news that Toshiba was seeking damages from it after a recall of Sony-made computer batteries in Toshiba products. Export-focused stocks also profited from the weaker yen, which was near a 10-month low against the dollar.  This pushed up the export-focused machinery sector by 1.8%. Komatsu, the construction equipment maker, jumped 2.6% to Y2,195.  The domestically focused retailer sector climbed 1.3%. It was boosted by speculation about further consolidation after trading house Marubeni’s announcement that it had begun talks on a partnership involving retailer Daiei, in which it has a 45% stake, and retailer Aeon. Seven & I, Japan’s biggest retailer and an operator of convenience outlets, department stores and supermarkets, rose 1.6% to Y3,940.

Japanese fixed income markets have fully reversed their rally from the lower-than-expected CPI adjustment in late August, with prices on 10-year JGBs down to 99.283 and yields up 4 basis points to 1.785%.

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