Tokyo: Japanese shares jumped nearly 3% and the yen tumbled on Friday after the G-7 group of rich nations agreed on joint intervention to curb the Japanese currency’s rise, showing its support as the country struggles with a nuclear crisis.
The G-7 move comes a day after the yen soared to a record 76.25 in chaotic trading, and a week after Japan was struck by a 9.0 magnitude earthquake and devastating tsunami that crippled the Fukushima nuclear power plant.
“This is the first coordinated intervention we have seen since 2000, so it’s going to have a very huge resonating effect on the market,” said Kathy Lien, director of currency research at GFT in New York.
The dollar spiked nearly 3% to a high of 81.49 after the announcement of joint intervention, which came just as Tokyo stock markets opened. The dollar was last trading around ¥81.15. Traders said the Bank of Japan had been spotted buying dollars.
Market players saw the move as putting a floor under the dollar around ¥80 for now, but some doubted how much impact it would have in the longer term.
“It looks like we’ll see a nervous battle between the BOJ and the speculators,” Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“Hedge funds have expanded their asset-holdings to unprecedented levels, so even if it’s a coordinated intervention, effectively it may be similar to one-country intervention, so looking mid- long-term, I’m not sure if they’ll be able to curb it.”
The Nikkei share average was up 2.7%, to stand down around 10% on the week and headed for its biggest weekly slide since the 2008 financial crisis. JGB futures fell.
Shares of big exporters, whose profits are eroded by a stronger yen, were prominent among the gainers. Tokyo Electron rose 3.4% and TDK was up 3%.
“The main things investors are worried about now are the nuclear plant, impact of the earthquake and tsunami on firms and power cuts putting pressure on Japanese manufacturers,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
Japanese government bond benchmark 10-year futures fell 0.15 point to 139.55, while the 10-year yield rose 2 basis points to 1.22%.
“Moves of JGBs are limited from the announcement as yields didn’t fall much over the past few days due to caution over the Japanese government’s fiscal position,” said Hidenori Suezawa, chief strategist, Nikko Cordial Securities
“Stock and forex markets are reacting more vividly as their moves were much sharper than JGBs after the earthquake.”