* Japan intervention pushes yen sharply lower, Nikkei up
* US stocks end modestly higher, Europe down on data
* Treasury yield curve steepens on expected Japan buys
(Updates with US markets close)
By Walter Brandimarte
NEW YORK, Sept 15 (Reuters) - The dollar posted its largest
daily gain against the yen in nearly two years as Japan began
selling its currency on foreign exchange markets on Wednesday,
while global economic uncertainties weighed on stocks.
Prices of two-year U.S. Treasuries rose as traders
anticipated the Bank of Japan may soon buy shorter-dated U.S.
debt to park dollars coming in from its currency intervention,
the first in more than six years.
Japanese shares jumped as a weaker currency should benefit
exporters. Nikkei stock futures traded in Chicago continued to
gain late in the afternoon, with the December contract <NKZ0>
rising 10.0 points to 9.660 points.
But weak U.S. manufacturing data rekindled concerns about
the global economic recovery, weighing on global stocks and
keeping gold prices near record highs.
Meanwhile, the yuan scored its fastest five-session rise
against the dollar in more than two years, as U.S. pressure
mounts again over the value of the Chinese currency.
Japanese authorities sold more than 2 trillion yen ($23.37
billion) on Wednesday, according to market estimates, and
promised to keep intervening in the foreign exchange market to
protect its fragile economic recovery.
But analysts questioned whether the government may
eventually curb the strength of the yen, which recently reached
its highest level in 15 years, threatening Japanese exporters.
[]
"Speculators have been long of yen so there is scope for
further yen selling. But there's skepticism over whether the
Japanese can change the trend as fundamentals haven't altered,"
said Beat Siegenthaler, a foreign exchange strategist at UBS.
The dollar remains nearly 8 percent lower this year against
the yen, which is seen by investors as a safe haven from
concerns over global growth.
The dollar jumped 3.23 percent to a 85.73 yen <JPY=>, after
having dropped to a 15-year low of 82.87 yen earlier, and was
up 0.5 percent against a basket of major currencies <.DXY>.
Japan's intervention also helped send the euro, Australian
dollar and sterling sharply higher on the day against the
Japanese currency, although traders doubted Tokyo had bought
anything other than dollars.
The euro was up 3.3 percent at 111.50 yen <EURJPY=>.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Stories on yen strength, intervention: []
PDF on yen's rise: http://r.reuters.com/zuz33p
Reuters Insider TV-Dlr bounce: http://link.reuters.com/fet63p
Graphic on yen strength: http://r.reuters.com/puw56n
Japan political risk: http://r.reuters.com/jyj83n
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
PRESSURE OVER CHINA
The Chinese yuan <CNY=CFXS> rose 0.77 percent against the
greenback from its close of 6.7943 on Thursday last week.
Dealers said, however, that the yuan's latest rally also
coincided with the dollar index's 1 percent decline in global
markets over the same period. They warned that a pullback in
the yuan's rise could occur as soon as Thursday if the dollar
rebounds globally.
"U.S. pressure may be the key reason for the PBOC to let
the yuan rise recently, but global dollar weakness has also
offered an easy excuse," said a trader at a European bank in
Shanghai.
"If things run out of control, the PBOC could equally make
a global dollar rebound an excuse to pull the yuan back
sharply."
DATA SAPS STOCKS
Japan's benchmark Nikkei stock index <> rose 2.3
percent, supported by gains for exporters like Toyota Motor
Corp <7203.T>, which climbed 3.8 percent.
But weak U.S. economic data weighed on world stocks, with
the MSCI All-Country World index <.MIWD00000PUS> edging higher
a modest 0.11 percent.
U.S. industrial output decelerated in August while a
measure of New York state business conditions slipped to its
lowest level in more than a year, reigniting fears that the
world's largest economy could be slowing.
"Pretty much everything was down across the board as far as
the data, and the market really didn't flinch. It recovered
quite nicely once the bell rang," said Dan Cook, senior market
analyst at IG Markets in Chicago. "Maybe we are just taking a
pause before that next charge begins."
The Dow Jones industrial average <> ended 46.24 points,
or 0.44 percent, at 10,572.73, while the Standard & Poor's 500
Index <.SPX> rose 3.97 points, or 0.35 percent, to 1,125.07.
The Nasdaq Composite Index <> gained 11.55 points, or 0.50
percent, to 2,301.32.
In Europe, the FTSEurofirst 300 <> of top shares
slipped 0.28 percent, pressured by disappointing economic
numbers and a sharp decline in oil prices.
US YIELD CURVE STEEPENS
The U.S. Treasury yield curve steepened as investors bet
any buying by Japan in the wake of its currency intervention
would likely take place in shorter-dated debt.
The 2-year U.S. Treasury note <US2YT=RR> rose 1/32 in
price, with the yield at 0.4835 percent, while the 30-year bond
<US30YT=RR> fell 45/32, with the yield at 3.8766 percent.
Oil prices fell 1.02 percent to $76.02 a barrel, down for
the second day, as traders bet that a key pipeline that carries
oil from Canada to the U.S. Midwest will restart soon,
following news that repairs to the damaged facility had been
completed Tuesday night.
Gold prices <XAU=> remained practically stable at $1,267.60
an ounce, near its record peak of 1,274.75 set on Tuesday.
(Additional reporting by Charlotte Cooper in Tokyo, Richard
Leong and Leah Schnurr in New York; Editing by Andrew Hay)
