Thursday, September 16, 2010

Nikkei edges down; eyes on yen intervention impact

TOKYO: Tokyo stocks inched down after hitting a five-week high on Thursday, Sept 16 as the yen failed to continue to weaken as much as some market players had hoped after Japan intervened in the market the previous day to weaken it.

The yen's tumble off a 15-year high against the dollar due to Japan's first intervention in six years boosted the benchmark Nikkei more than 2 percent on Wednesday, lifting shares of exporters such as high-tech firms and automakers.

Short-covering continued to lift the stock market earlier on Thursday, but concerns about how effective Japanese authorities would be kept the dollar/yen rate in check and that weighed on share prices.

"The yen's retreat hasn't been as big as the market had hoped -- dollar/yen has yet to touch 86 yen -- and the yen remains on the strong side. That weighed on stocks that have been boosted short-covering. New money isn't really flowing in," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co.

Investors will be watching a series of events in the United States for further clues on the yen's future performance.

U.S. Treasury Secretary Tim Geithner will testify before the Senate Banking Committee at 1400 GMT, and the Federal Reserve is scheduled to hold a policy-setting meeting next Tuesday.

Any criticism from Geithner on Japanese intervention could spark speculation that Japan may scale back its activity, dealers said.

"Investors are sceptical about the effectiveness of the intervention as it was a solo action and the Fed meeting is on the horizon. If the Fed decides on further quantitative easing, for example, that would lead the yen to strengthen again," Akino said.

The dollar traded at 85.33 yen. It had hit a 15-year low below 83 yen on Wednesday just before Tokyo stepped into the currency market.

Repatriation flows by investors and manufacturers sending overseas earnings back to Japan this month could also nudge the yen higher against the dollar, one market analyst said.

The benchmark Nikkei fell 0.2 percent or 17.44 points to 9,499.12 after touching a five-week intraday high of 9,620.90. The broader Topix dipped 0.6 percent to 843.64.

Market players said the Nikkei also trimmed gains after facing stiff selling pressure above 9,600 from investors who had waited to square large long positions built at that level.

But they said the Nikkei could probe further highs once the position squaring peters out.

"There are also substantial short positions needing to be covered at levels around 9,500 and 9,600. Some short-covering began in futures yesterday and the same could happen in the cash market," said Kenichi Hirano, operating officer at Tachibana Securities.

From a technical viewpoint, the focus was on whether the Nikkei could consolidate its footing above the 75-day moving average, currently around 9,455.

The benchmark moved above its 75-day moving average for the first time in four months the previous day, which is seen as a bullish signal.

The Nikkei moved further into its Ichimoku cloud, an area of resistance on technical charts, after piercing the bottom of the cloud on Wednesday. Further resistance is seen at around 9,660, the top of the cloud. Ichimoku charts are popular with Japanese traders.

Shares of exporters were mixed, with Sony Corp rising 1.3 percent to 2,630 yen but Canon Inc falling 0.1 percent to 3,830 yen. Among automakers, Toyota Motor Co was up 1.3 at 3,050 yen. - Reuters

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