10:59 PM
Yen dips, Japan stocks rise on intervention talk
Addison Ray
By Elaine Lies and Kevin Plumberg
TOKYO/HONG KONG | Fri Sep 24, 2010 1:15am EDT
TOKYO/HONG KONG (Reuters) - The yen dropped on Friday, driven by rumors Japan was intervening for the second time this month to weaken it, while Japanese equities cut their losses on strength in exporter stocks.
Currency dealers had been expecting Japan to step back into the market after heavy yen-selling intervention last week for the first time since 2004, though renewed pressure on the dollar resulting from the risk of more monetary easing by the Federal Reserve and falling U.S. yields made them wonder about the timing.
"Given that this would be the second time (for intervention) and not as much of a surprise, I think the impact would be pretty limited at best. Even now, it seems tough for the dollar to hang onto the 85 yen level, and this will make it hard for the Nikkei to rise substantially in turn," said Masayoshi Okamoto, head of dealing with Jujiya Securities in Tokyo.
Japanese equities followed the dollar higher against the yen, with investors embracing the benefits to domestic exporters of a weaker currency.
The dollar was at a session high around 85.38 yen minutes after trading at 84.50 yen, with dealers citing talk of intervention. The post-intervention low of 84.26 yen was hit on Thursday.
Japan intervened on September 15 minutes after the dollar hit a 15-year low of 82.87 yen, selling an estimated 2 trillion yen ($23.70 billion), its largest single-day yen selling intervention. Also pressuring the dollar were shrinking yield gaps between the dollar and the yen.
Japan's Nikkei share average was largely unchanged on the day, cutting earlier losses. Big exporter stocks such as Toyota (7203.T) and Honda (7267.T) were among the biggest supports to index.
($1=84.37 Yen)
(Editing by Alex Richardson)
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