Reuters: US Dollar Report: UPDATE 1-Japan MOF's Nakao: ready to act on yen if needed

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UPDATE 1-Japan MOF's Nakao: ready to act on yen if needed May 1st 2012, 04:08 Tue May 1, 2012 12:08am EDT * Concerned rapid yen rise reflects speculation * Vigilant on speculation in thin trade during holidays * Dlr at 2-month low on world economy woes despite BOJ By Tetsushi Kajimoto TOKYO, May 1 (Reuters) - Japan's top financial diplomat said on Tuesday the rapid appreciation of the yen since the end of last week reflects market speculation and he is ready to act if needed. With the dollar hovering at two-month lows below 80 yen, Takehiko Nakao, vice finance minister for international affairs, said there is a need to be vigilant on the foreign exchange market to see if speculative moves are causing the yen's rise. "We will continue to closely monitor the market with caution so we can act in a timely and appropriate manner when needed," Nakao told reporters at the ministry. He said the volume of transactions in the currency market will be smaller than usual this week due to Japan's Golden Week holidays, adding: "We should be vigilant about the market, and whether there's speculative movement for the yen's appreciation to take advantage of this timing." Japanese policy-makers worry that a renewed spike in the yen could hurt exporters, a key driver of the economy, and derail the recovery from last year's earthquake and tsunami that devastated large areas of the northeast coast. Japan spent a record 8 trillion yen ($100 billion) in unilateral intervention in the currency market last Oct. 31, when the dollar hit a record low of 75.31 yen, and another 1 trillion yen in early November on undeclared forays into the market. Authorities have stayed out of the market since then. The yen held at two-month highs against the dollar on Tuesday, having rallied across the board as investors snapped up the safe-haven currency after disappointing economic news from Canada to Spain tempered risk sentiment. The dollar was around 79.76 yen on Tuesday, down from around 81 yen at the end of last week. The U.S. currency had been trading in a range of 80-84 yen since late February, after the Bank of Japan adopted surprise easing steps and set a new goal of 1 percent inflation. Some government officials say the currency market does not fully reflect Japanese economic fundamentals and the central bank's determination to stick to a policy of monetary easing to end deflation, which has hampered the economy for over a decade. Last Friday the BOJ increased its bond buying by 10 trillion yen, expanding the target of its bond purchases to those with up to three years left to maturity from those with two years or less, and increased its buying of exchange-traded funds. But these easing steps failed to keep the yen from firming, with the market seeing them as incremental rather than significant steps to pull the economy out of the doldrums. Link this Share this Digg this Email Reprints

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