Yen Rises to 8-Month High on Speculation Japan Won’t Intervene

By Yoshiaki Nohara

Sept. 28 (Bloomberg) -- The yen rose to the highest level in eight months versus the dollar on speculation Japan won’t intervene to stem gains in the currency and exporters repatriated profits.

Japan’s currency advanced against all of its 16 major counterparts after Finance Minister Hirohisa Fujii said its appreciation wasn’t excessive and Asian stocks slumped. The dollar gained against the euro before a German report forecast to show consumer prices dropped for the first time in four months, damping demand for higher-yielding assets funded in the greenback.

“The government’s stance on a strong yen is careless, as it doesn’t benefit the nation’s export-driven economic structure,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Japanese firms are continuing to bring home profits.”

The yen climbed to 89.30 per dollar as of 12:35 p.m. in Tokyo from 89.64 in New York on Sept. 25. It earlier touched 88.24, the strongest level since Jan. 23. The currency rose to 130.26 per euro from 131.70, after earlier reaching 129.83, the highest since July 14. The dollar gained to $1.4586 per euro from $1.4689.

Fujii reiterated last week he doesn’t support a weak yen, fueling speculation Japan won’t resort to intervention to curb the yen’s 17 percent appreciation in the past year. Central banks intervene in foreign-exchange markets by selling and buying currencies.

“Movements have been a little one-sided recently,” Fujii told reporters in Tokyo today. “Stable movements in currencies are desirable.”

Large manufacturers in Japan forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.

Stocks Fall

“Although the yen pared part of its gain following the latest comments from Fujii, I don’t think his remarks can turn around the latest round of the currency’s rise,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a foreign-exchange unit of Japanese trading house Itochu Corp. “Given the wide-spread view that Japan won’t intervene, the yen may re-test the 88 yen level.”

The yen and dollar gained as a decline in Asian stocks boosted demand for safe-haven currencies. MSCI’s Asian Pacific Index of shares lost 1.6 percent while Japan’s Nikkei 225 Stock Average plunged 2.4 percent.

“Falling stocks are also boosting demand for the yen as a refuge,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “The yen is likely to trade high against the dollar for a while.”

‘Painful’ Yen

In a survey released by Japan’s Cabinet Office on April 22, companies said they can remain profitable as long as the yen trades at 97.33 per dollar or weaker. A rising currency hurts exporters by making their goods more expensive to foreign buyers. Exports account for 12 percent of Japan’s economy, compared with 6 percent in the U.S.

Toyota Motor Corp., the world’s largest automaker, fell as much as 4 percent today in Tokyo trading. The Japanese currency’s current level of about 90 per dollar is “painful,” Toyota Executive Vice President Yukitoshi Funo said on Sept. 25.

Japan’s currency also gained on expectations exporters are taking advantage of an April 1 rule change that waives taxes on repatriated profits. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings. The first half of Japan’s fiscal year ends Sept. 30.

German Prices

The yen climbed to 87.13 on Jan. 21, the strongest since July 10, 1995. The median forecast among securities companies is for the currency to trade at 96 to the dollar at year’s end and 98 at the end of the first quarter of 2010.

The dollar gained against 15 of its 16 major counterparts as economists in a Bloomberg News survey forecast German consumer prices fell 0.2 percent this month after gaining 0.2 percent in August. The Federal Statistics Office in Wiesbaden is set to report the data today.

“Markets are clearly showing signs of weakening,” said Robert Rennie, head of currency research at Westpac Banking Corp. in Sydney. “For the next couple of days, you are going to see a downside in risk currencies. The dollar can benefit.”

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, gained 0.4 percent to 77.147.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

Last Updated: September 27, 2009 23:56 EDT