Business Blog Posts

LONDON (Reuters) � The dollar leapt more than two yen from a 15-year low on Wednesday after Japan intervened to sell yen for the first time in six years but analysts said the authorities could face a tough task in stemming yen gains.

The solo intervention helped propel the euro, Australian dollar and sterling sharply higher against the yen though traders doubted Japan had bought anything other than dollars.

Kyodo news agency cited a senior finance minister official saying Japan had intervened during European hours and would do so again during New York hours if needed. However, analysts said Japan's authorities would have to counter significant upward pressure on the yen, particularly if speculation of more U.S. quantitative easing continued. This could further narrow the gap between U.S. and Japanese yields -- a key factor in recent dollar/yen weakness.

"Flows into the yen are very strong, and the Japanese authorities will have to offset those flows in order to prevent further yen appreciation," said Ian Stannard, currency strategist at BNP Paribas.

"A sustained upward move in dollar/yen is unlikely unless U.S. rate expectations start to rise."

At 1159 GMT (7:59 a.m. EDT), the dollar was up 2.9 percent at 85.48 yen, near a high of 85.72, according to Reuters data.

The Bank of Japan acts for the Ministry of Finance in intervention, which traders said continued in the Asian and European sessions after an initial bout at around 83 yen per dollar shortly after the dollar hit a 15-year low of 82.87 yen.

During the European session, traders reported buying of dollars in the 84.95/85.00 area and at 85.25 on trading platform EBS, before strong offers above 85.50 capped the move.

The euro was 2.7 percent higher at 110.86 yen. Earlier it briefly entered its Ichimoku Cloud, an indicator of momentum and future areas of support and resistance, at 111.01.

"I think we're now going to see persistent official buying of dollar/yen in the near-term," said Adam Cole, head of currency strategy at RBC Capital Markets.

Some stop-losses were reported at 85.75 yen, but technical analysts said the focus remained on the downside while dollar/yen held below key resistance at 86.40, which is the bottom of the Ichimoku Cloud.

DECISIVE STEPS

Sources familiar with the matter said the BOJ was ready to leave the intervention unsterilized rather than draining the funds that went into the currency market.

Japan's authorities aim to stop the yen's rise from hurting exporters and the economy. Prime Minister Naoto Kan said the intervention had achieved some effect but that foreign exchange moves were being watched with urgency.

Finance Minister Yoshihiko Noda said Japan acted alone.

Implied dollar/yen volatility was higher with the one-month

trading around 12.50 percent up from 12.3 on Tuesday but well below year-to-date highs seen in May near 18.00.

Risk-reversals, the premium required to hold a put or a call in a currency, were showing less of a bias for yen calls. The one-month 25-delta stood around 0.70 for yen calls compared with 1.50 on Tuesday

The Bank of Japan started buying the dollar at around 10:30 a.m. (0130 GMT) on Wednesday.

Traders cited market estimates that the latest intervention amounted to around 1.5 trillion yen ($17.67 billion)

"Speculators have been long of yen so there is scope for further yen selling. But there's skepticism over whether the Japanese can change the trend as fundamentals haven't altered," said Beat Siegenthaler, FX strategist at UBS.

The yen gained fresh momentum on Tuesday after Japanese Prime Minister Naoto Kan won a leadership ballot against a rival seen as more willing to intervene to weaken the currency.

The euro was down 0.1 percent versus the dollar at $1.2977.

(Additional reporting by TOKYO markets team and Neal Armstrong in London)

LONDON (Reuters) � Stock index futures signaled a mixed start for Wall Street on Wednesday, with futures for the S&P 500 down 0.1 percent, Dow Jones industrial average futures flat and Nasdaq futures up 0.1 percent by 5.20 EDT.

Stocks on Wall Street closed little changed on Tuesday after promising data from the retail sector fed recent optimism that the economic recovery, while slow, was proceeding.

In the currency market, the dollar jumped more than two yen from a 15-year low after Japan intervened to sell yen for the first time in six years.

Investors are expected to focus on further economic data scheduled for release on Wednesday to gauge the pace of economic recovery.

U.S. industrial production figures for August, due at 1315 GMT, is seen rising for the third straight month.

The New York Federal Reserve's Empire State index for September, expected at 1230 GMT, is also forecast to show a pick-up in factory activity this month.

In company news, Bank of America Corp (BAC.N) Chief Executive Brian Moynihan said on Tuesday the bank must be less volatile and was continuing to streamline its myriad businesses worldwide. He also sees more opportunities to cross-sell products to different parts of its customer base.

Another Transocean Ltd (RIG.N) rig is leaving the deepwater Gulf of Mexico, still under contract with Statoil (STL.OL), the fourth rig departure resulting from a moratorium on U.S. deepwater drilling.

Intel Corp (INTC.O) unveiled microprocessors for smart TVs and Web-connected cars on Tuesday and expanded an online store selling application for netbooks built with its Atom chips.

Google Inc (GOOG.O) plans to gradually introduce social-networking features starting this fall, reviving attempts to compete with Facebook after pulling the plug on its stillborn Wave project.

Mortgage finance giants Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) will not exist in their current form after a revamp of the U.S. housing finance system, a top Obama administration official said on Tuesday.

Speaking at a healthcare conference, Sanofi-Aventis (SASY.PA) chief executive Chris Viehbacher said the firm was not in a hurry to buy Genzyme Corp (GENZ.O), and still does not see anyone else trying to buy Genzyme.

Abbott Laboratories (ABT.N) faces a critical test on Wednesday over whether its controversial diet pill should remain on the U.S. market, despite heart risks.

Terra Firma Capital Partners Ltd can proceed to trial against Citigroup Inc (C.N) in their dispute over Terra's 2007 acquisition of music group EMI, a federal judge ruled on Tuesday.

American International Group (AIG.N) could list its Taiwan unit Nan Shan Life as a possible option following regulators' rejection of a $2.2 billion bid for the unit, a Taiwan newspaper reported on Wednesday.

After the closing bell on Tuesday, shares in MasterCard Inc (MA.N) gained 1.6 percent to $202.99 in extended trade after the company's board authorized the repurchase of $1 billion in Class A stock.

On the economic front, Richmond Federal Reserve President Jeffrey Lacker said in an interview with The Wall Street Journal that the U.S. economic recovery did not need an additional boost from the Federal Reserve now and will not need one if it continues along the track expected by policymakers.

President Barack Obama edged closer to naming Wall Street critic Elizabeth Warren as his new top consumer financial watchdog on Tuesday, but lawmakers were split over how he should do it.

Shares in Europe edged lower by mid morning trade in a choppy session. Gains in carmakers limited losses, with Renault (RENA.PA), which has a significant stake in Japan's Nissan (7201.T), up after Japan intervened to weaken the yen.

(Reporting by Harpreet Bhal; Editing by Will Waterman)

BEIJING/NEW YORK (Reuters) � China's state-owned Sinochem Corp appears unwilling to make a bid for Potash Corp, even as Beijing voiced concern over BHP Billiton's $39 billion bid for the Canadian firm on Wednesday.

Sinochem would instead consider buying some of Potash Corp's assets such as its nitrogen or phosphates businesses as an acquisition of the fertilizer giant would not be a good deal, a senior Sinochem official was quoted telling an influential Chinese magazine.

China, which typically buys about 7 percent of the output of Potash Corp, the world's largest fertilizer maker, fears a BHP takeover might push up the cost of fertilizers crucial to boosting food production for its huge population.

That has fed speculation that a major state-owned Chinese company might try to stymie BHP's hostile takeover bid by launching a rival offer or by buying a blocking stake in Potash Corp, with market talk centering on Sinochem.

Han Gensheng, in charge of Sinochem's overseas deals, was quoted by business magazine Caijing as saying even a bid of $10 billion would be too large for Sinochem, parent of China's largest fertilizer distributor, Sinofert Holdings.

China voiced concern about the deal on Wednesday, with the Ministry of Commerce saying it would closely watch BHP's bid for Potash Corp and would investigate the deal if Beijing received a formal application for approval.

"Such a deal will definitely be a concern for the global potash industry, including China's potash industry," ministry spokesman Yao Jian told a regular news conference.

Yao said neither Sinochem nor any other Chinese firm had notified the ministry of a possible counterbid for Potash Corp.

"We have not received any material or information from any individual domestic company," he said.

BID BLOCKING

Bankers have downplayed the prospect of a Chinese counterbid, saying Canada would be concerned about a customer taking over Potash Corp with the aim of keeping potash prices low.

Bankers also say any counterbid would have to exceed $45 billion, a massive price, to outgun BHP's balance sheet.

"That's a lot of money for any organization," said a resources banker not involved in the deal.

Caijing cited unnamed Sinochem sources as saying that Sinochem had written to the State Council, the cabinet, seeking support from the country's sovereign wealth fund CIC or China's state lenders if Sinochem decided to bid for Potash Corp.

The cabinet did not reply directly and had required Sinochem to work on a detailed feasibility report, the magazine said.

Chinese officials have ordered state-owned companies to meet investment bankers to explore potential options to block BHP's bid for Potash, and Sinochem has approached Singaporean state investor Temasek Holdings to join a consortium that may make a bid, sources have told Reuters.

Potash Corp is confident it will get a better offer than BHP's bid of $130 a share.

"We believe BHP will not be the only bidder in this process, as we continue to seek to maximize value for all of our shareholders," Chief Executive Bill Doyle said in a letter to Potash Corp employees on Monday.

Potash shares last traded at $148.44, 14 percent above BHP's offer. BHP's shares rose 1 percent to A$39.44.

Caijing reported that Sinochem was considering four options. The first option was to file a bid for Potash Corp directly to compete against BHP, but it noted that would be too expensive and would run into Canadian regulatory hurdles.

The second option would be to work with other potential partners, including Rio Tinto, Vale, Teck Resources and Cameco Corp.

The third was to work with BHP and the fourth for Sinochem to invest $10-13 billion to buy preferred shares or convertible bonds issued by Potash Corp to become a strategic investor, the magazine said.

The last option appeared to be unlikely, according to Potash Corp investors who were briefed on Tuesday.

Potash Corp is not considering selling a large stake to a third party or setting up long-term production sharing agreements to block BHP's hostile bid, investors said.

That would mean that China or other rival bidders would have to consider a full takeover of Potash Corp or look to acquire a blocking stake from existing investors if they want to scupper BHP's offer.

(Additional reporting and writing by Sonali Paul in Melbourne; Editing by Mark Bendeich and Valerie Lee)