Japan yen hits record high vs dollar, Nikkei down
Thursday, March 17, 2011
BANGKOK (AP) — The yen hit a record high against the dollar and Japanese stocks regained some of their fortitude after drooping earlier Thursday, energizing stocks in Europe and pushing U.S. futures higher even as Japan struggled to avert a post-earthquake nuclear catastrophe.
Japan’s benchmark Nikkei 225 lost 1.4 percent to close at 8,962.67, but that was a recovery from a 3.6 percent drop upon opening. Oil prices rose above $99 a barrel in Asia as traders mulled whether damage to nuclear power plants in Japan will eventually boost demand for crude.
The dollar was hovering just above 79 yen in Asia — well below its previous all-time low of 79.75 yen set in April 1995 after plunging to 76.53 yen in the morning
European shares were higher after the Nikkei moderated its losses and the Bank of Japan showed its determination to save the economy by injecting huge amounts of cash into the money markets.
Britain’s FTSE 100 rose 0.8 percent to 5,640.72. Germany’s DAX was up 1.1 percent to 6,588.36 and France’s CAC-40 rose 1 percent to 3,736.69. Wall Street was set to gain, with Dow Jones industrial futures up 0.8 percent to 11,672 and the S&P 500 futures 1.1 percent higher to 1,267.70.
Analysts attributed the yen’s wild swings to fears of a possible meltdown of a nuclear reactor that was crippled when a 9.0-magnitude earthquake struck off Japan’s northeastern coast Friday, spawning a devastating tsunami that likely killed more than 10,000 people.
U.S. officials in Washington warned the Fukushima Dai-ichi plant may be on the verge of spewing more radioactive material and told Americans to stay at least 50 miles away from the plant. Japanese military helicopters were dumping sea water onto a stricken reactor in an attempt to avoid a full meltdown.
“Growing uncertainty over the nuclear plant really spooked investors, promoting them to adjust positions and buy back the yen,” said Masatoshi Sato, market analyst at Mizuho Investors Securities Co. Ltd.
A major natural disaster tends to bolster the yen because investors expect the Japanese to repatriate funds from overseas to pay reconstruction costs — or in the case of insurance companies, to pay claims for the massive loss of property and life. Analysts at Goldman Sachs estimated disaster losses at up to $200 billion.
But the immediate rise in the yen was linked to speculators scooping up the currency in anticipation of rising demand for it, analysts said.
“For the yen to be responding instantly to changing developments indicates one thing for sure, the current driver of yen demand is short-term speculative flows and the idea that repatriation is the driver is clearly questionable,” said Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
Market observers widely expected the Finance Ministry and Bank of Japan to intervene to weaken the yen. A strong yen hurts Japan’s exporters, potentially deepening the already severe hit to the world’s No. 3 economy from the multiple disasters.
Sectors were hit unevenly. Toyota Motor Corp., the world’s biggest automaker, was down 2.2 percent after halting auto production shortly after the quake.
Elpida Memory Inc., the world’s No. 3 maker of computer-memory chips, lost 2.9 percent. Toshiba Corp., another company forced to shut factories after the quake, was down 0.9 percent. Tokio Marine Holdings Inc., a major insurer, was down 3.4 percent.
But Mitsubishi Motors Corp. rose 2 percent after the company announced that it had started three plants Wednesday and plans to have them running through Thursday, using inventory parts.
Major benchmarks across Asia were down, including Hong Kong’s Hang Seng index, off 2 percent to 22,256.59 and Australia’s S&P ASX 200, down 0.1 percent to 4,555.30. Benchmarks in India, Singapore and Taiwan were also lower, while South Korea’s Kospi managed a marginal gain to 1,959.03.
Mainland China’s Shanghai Composite Index fell 1.1 percent to 2,897.30 while the Shenzhen Composite Index lost 1.8 percent to 1,284.96.
Jackson Wong, vice president at Tanrich Securities in Hong Kong, said the slump in Chinese shares reflected confusion in the markets, but that volumes were low because many investors were waiting on the sidelines for the outcome of the crisis in Japan.
“A lot of investors still don’t know what to do. Everyone is waiting for the Japan nuclear crisis to be resolved,” he said. “If it really explodes, that would be a very major crisis.”
Chinese auto companies that have joint ventures with Japanese manufacturers like Toyota, Honda and Nissan were among market losers, as disruptions of imported parts from Japan was expected to hinder production and sales. Hong Kong-listed Dongfeng Motor Group Co. Ltd. was down 7 percent. GAC Group lost 4.6 percent.
Fears in China that future salt shipments could be contaminated from radiation in Japan led to panic-buying of salt on the mainland. That led to steep rises in shares of salt producers Inner Mongolia Lantai Industrial Co. Ltd. and Yunnan Salt & Chemical Industry Co. Ltd. Both hit the daily limit of 10 percent.
Fears about the safety of nuclear power weighed on the shares of companies involved in uranium mining. Energy Resources of Australia Ltd., one of the world’s largest uranium producers, fell 6.1 percent in Sydney.
The post-quake plunge in Japan’s stock market on Monday and Tuesday prompted extraordinary government efforts to reassure investors and keep markets functioning to support recovery. The Bank of Japan injected an additional 6 trillion yen ($76.7 billion) in same-day funds Thursday that banks in need can access immediately.
From Monday to Wednesday, the central bank’s emergency funding totaled 55.6 trillion yen ($688.3 billion). The Tokyo exchange’s president also publicly appealed for calm.
The Nikkei had shed more than 1,600 points, or 16 percent, in panic selling on Monday and Tuesday as worries over the nuclear crisis triggered widespread selling.
In New York on Wednesday, financial markets suffered broad losses. The Dow Jones industrial average fell 2 percent to 11,613.30 — the worst drop since Aug. 11. The Dow has now lost 3.6 percent over the past three days.
The S&P index fell 1.9 percent to 1,256.88. The S&P is now down 0.1 percent for the year, having been up as much as 6.8 percent in February. The Nasdaq composite index fell 50.51 or 1.9 percent, to 2,610. It is now down 1.4 percent for the year.
Benchmark crude for April delivery was up $1.09 to $99.09 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 80 cents to settle at $97.98 on Thursday.
The euro rose to $1.3988 from $1.3901 late Wednesday.
Associated Press business writer Joe McDonald contributed from Tokyo and researcher Fu Ting contributed from Shanghai.