Singapore: The yen surged to a record high against the dollar and shares in Japan and elsewhere in Asia fell on Thursday after US officials said the risk of a catastrophic radiation leak from an earthquake-stricken Japanese nuclear plant was rising.
The unfolding disaster in Japan has sent fear coursing through markets, hitting shares and other riskier assets such as commodities and boosting safe-haven government debt, as investors struggle to get a fix on the scale of the nuclear crisis and the size of the economic and human toll it might deliver.
Operators of the Fukushima Daiichi nuclear complex, 240 km north of Tokyo, said they would try again on Thursday to use military helicopters to douse the plant’s overheating reactors.
“Fear is the only factor driving the market today and if you look at news about temperatures rising, things exploding, you’re not going to trade calmly, right?” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
The yen spiked around 4% against the dollar, initially driven by speculation that Japanese insurers would have to repatriate funds to pay for massive claims following Friday’s 9.0 magnitude quake and the devastating tsunami it triggered.
That run-up set off a wave of stop-loss and options-related selling that sent the currency rocketing as far as 76.25 to the dollar on electronic trading platform EBS in increasingly chaotic trading, before easing to around 79.20.
“It’s mayhem out there,” said one trader at an Australian bank in Sydney as liquidity evaporated and bids were pulled. “The yen’s been moving a big figure a second on occasions. A lot of people are crying out for the central banks to step in.”
Japan’s finance minister Yoshihiko Noda blamed speculation for the spike in the yen and said he would closely watch market action. Markets usually interpret such comments as a reminder that the authorities could intervene to curb the currency.
“There’s a real possibility that authorities would intervene to calm the markets, though I don’t think it will be heavy,” said Junya Tanase, a foreign exchange strategist at JPMorgan Chase in Tokyo.
Japan’s Nikkei fell 2.1%, with big exporters such as industrial robot maker Fanuc and car maker Toyota , whose overseas earnings are eroded by a stronger currency, taking the most points off the index.
Fanuc fell 3% and Toyota 3.6%.
Japanese stocks had suffered their biggest two-day rout since the 1987 crash on Monday and Tuesday before rebounding nearly 6% on Wednesday.
Asian shares outside Japan were down 1.2%, with Hong Kong’s Hang Seng down 2%.
Benchmark 10-year Japanese government bond futures rose 0.24 point to 139.96, following a surge in US Treasuries the previous day, in thin, choppy trading.
“Fast money accounts are making a killing in this volatile market moved by rumour after rumour,” said a trader at a foreign bank in Tokyo.
The CBOE Volatility Index or VIX , Wall Street’s favourite measure of investor fear, rose 20.89% to close at 29.40 on Wednesday, its highest level since 6 July. In the last two days, the VIX is up nearly 40%.
“Volatility is a product of the uncertainty that lingers out there,” said Jamie Spiteri, senior dealer and Shaw Stockbroking in Australia.
“A lot of investment in the market is being pulled back because of the uncertainty attached to something that hasn’t really got any recent or significant precedent.”
Gold fell more than $8 to $1,391 and oil prices eased, with Brent crude at $109.53 a barrel and the U.S. benchmark at $97.59, after rising 2% on Wednesday on fears of disruption to Middle East supplies.
Shanghai copper shed 1% and three-month copper on the London Metal Exchange lost 0.7%.
Worries about Japan and a spate of weak US housing data sent key Wall Street stock indexes down 2% overnight, with the S&P falling into negative territory for the year.