By Chikako Mogi
TOKYO, Feb 18 (Reuters) - Japanese shares jumped closer to a
33-month high as the yen slumped on Monday after Tokyo dodged
direct criticism from G20 peers on the aggressive reflation
plans that have weakened the currency.
The G20 opted not to single out Tokyo, but committed members
to refrain from competitive devaluations and said monetary
policy would be directed only at price stability and growth.
Japan said this decision is a green light to pursue its
The dollar soared 0.7 percent to 94.17 yen inching
closer to its highest since May 2010 of 94.465 hit on Feb. 11.
The euro added 0.3 percent to 125.51 yen, still below
its peak since April 2010 of 127.71 yen touched on Feb. 6.
The Nikkei average jumped 2.3 percent as exporters
and banks led the pack on the softening yen.
The market's focus is now on Prime Minister Shinzo Abe's
nominee for the next Bank of Japan governor. Abe is expected to
announce his choice in coming days.
Sources told Reuters that former top financial bureaucrat
Toshiro Muto is leading the field of candidates to govern the
bank. He is expected to intensify stimulus efforts to energise
'The G20's message is that monetary easing is OK, but not to
imply anything about leading a currency weaker. The G20 effect
is already seen in Abe's general comments on forex today which
steered away from giving specifics on a preferred level or
direction for the yen,' said Yunosuke Ikeda, a senior FX
strategist at Nomura Securities.
Abe said on Monday that the BOJ's monetary easing is aimed
at beating deflation, not at manipulating the forex market and
weakening the yen, and said correcting excessive yen rises
would be an appropriate policy direction. Previously, Japanese
officials have noted that the current yen selling was a
correction to the past excessive yen strength.
The yen's weakness weighed on emerging Asian currencies
while South Korean shares eased 0.3 percent on concerns
about the eroding competitive edge for the country's exporters.
'Japan will keep seeking the current policy. The rest of
Asia will not just wait and see. That will put more pressure on
Asian currencies,' said Yuna Park, a currency and bond analyst
at Dongbu Securities in Seoul.
A weaker yen would make other currencies relatively stronger
against the dollar and fuel speculation that other Asian
countries could step in to curb the strength of their
currencies, Ikeda said.
The MSCI's broadest index of Asia-Pacific shares outside
Japan eased 0.2 percent. The pan-Asian index
briefly hit a 18-1/2-month high on Friday and had its best
performance since the week of Jan. 6 with a 1.2 percent weekly
On Friday, MSCI's all-country world index, a
measure of global equity activity, traded down 0.26 percent,
while European shares closed lower and U.S. stocks ended flat.
Australian shares rose 0.5 percent as miners gained
on hopes that top customer China might start buying after the
Lunar New Year holidays, while blue chips Commonwealth Bank of
Australia and Telstra Corp Ltd dropped after
Markets in China and Taiwan resumed trading after a
Data from EPFR Global on Friday underscored that a
consolidation was underway in global equities after their recent
rally. It showed investors worldwide pulled $3.62 billion from
U.S. stock funds in the latest week, the most in ten weeks after
taking a neutral stance the prior week. But demand for emerging
market equities remained strong, with investors putting $1.81
billion in new cash into stock funds, the fund-tracking firm
Demand for commodities will likely be in focus as China
returns to the market.
Investors are also expected to focus on fiscal talks in
Washington, where policymakers are discussing a package of
budget cuts set to kick in on March 1. Analysts say the
austerity measures could hurt the U.S. economy.
U.S. crude fell 0.2 percent to $95.63 a barrel but
Brent inched up 0.1 percent to $117.81.
Gold rebounded from a six-month low on Monday as
bargain hunters resurfaced and jewellers in China returned to
the physical market after the Lunar New Year holiday, but a firm
U.S. dollar was likely to limit the upside.
(Additional reporting by Jongwoo Cheon; in Singapore; Editing
by Shri Navaratnam and Eric Meijer)
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