* Dollar at 85.30 yen, still not far from overnight highs
* Japan is silent in FX market
* Asia stocks fall from 5-mth high on profit taking
* Japan exporter stocks outperform
By Kevin Plumberg
HONG KONG, Sept 16 (Reuters) - The yen drifted higher on
Thursday, though the threat of Japan selling more of its
currency loomed, while Asian stocks slipped from a near
five-month high.
Japan's solo intervention to weaken the yen on Wednesday
arrived sooner than many market participants had expected,
making investors suspect officials in other Asian economies may
keep their currencies weak and pushing up longer-term U.S.
Treasury yields. []
For a yen PDF, click: http://r.reuters.com/zuz33p
"After Japan joined the club of Asian central banks by
intervening in the FX market, investors will now look to
determine how successful the policy will turn out be," Mitul
Kotecha, global head of foreign strategy at Credit Agricole
CIB, said in a note.
"In the near term there will be wariness of further
intervention to push the yen weaker, which will also keep other
Asian currencies on the back foot."
Asia's currencies are a major focus among investors
globally, especially with the Chinese government setting the
yuan's mid-point <CNY=SAEC> for its trading range at a
post-revaluation high for the fifth day in a row.
Beijing is under fire from Washington, where lawmakers have
threatened to take action against China's currency practices.
U.S. Treasury Secretary Timothy Geithner will tell policymakers
later in the day that he is looking for ways to get Beijing to
move faster on the yuan, his prepared remarks to Congress
showed. []
All eyes were on the U.S. dollar dripping lower against the
yen. Japan did not appear to step in to currency markets during
Asian trading hours, leaving what one trader called a
"deafening silence".
JAPAN'S RESOLVE
The U.S. dollar was down 0.5 percent at 85.30 yen, not too
far from Wednesday's high of around 85.75 yen <JPY=>. Dealers
on Thursday may further test Japan's resolve to keep the yen
weak, though portfolio managers with a longer time horizon
could hold off on closing out of bets on yen weakness.
"Institutional investors have started to close their
yen-short/dollar-long positions since mid-August, which I think
has helped to accelerate the yen's rise. Intervention could
make those investors think twice about closing their
positions," Kimihiko Tomita, the head of forex at State Street
Global Markets in Tokyo, said.
The yen was climbing the most against other currencies. The
Australian dollar, for example, rose 0.9 percent to 79.74 yen
<AUDJPY=R>.
Still, expectations that Japan is determined to make its
yen selling policy effective made Japanese exporter stocks
outperform most of Asia.
Japan's Nikkei share average <> was largely unchanged
after earlier climbing to the highest since August 10. Large
and liquid exporter stocks outperformed the broad market, with
Toyota Motor Corp <7203.T> up 2.2 percent.
Despite the Nikkei's stand-out equity gains this week,
Japan has significantly underperformed other advanced stock
markets in the current quarter. U.S. and European stocks are up
some 9 percent while Japan has eked out a gain of 1.3 percent.
The MSCI index of Asia Pacific stocks outside Japan slipped
0.6 percent <.MIAPJ0000PUS> on profit taking in the materials
sector. Commodity-related stocks have been outperforming the
MSCI index, climbing 20 percent since June compared with the
index's returns of 16 percent.
Investors will be looking to reports on new U.S. jobless
claims, producer prices and a regional manufacturing report
later in the day. Recent data has suggested the U.S. economy is
stuck in a soft patch but do not suggest a new recession is
brewing, as some analysts had feared.
Investors took advantage of the overnight rise in the
late-maturity U.S. Treasury yields and bought the bonds back.
The 10-year U.S. Treasury yield <US10YT=RR> slipped two basis
points from late Wednesday in New York to 2.70 percent.
Japan's yen selling had weighed on long-maturity U.S.
yields on Wednesday in anticipation that the purchased dollars
would presumably be recycled into short-maturity Treasuries.
The spread of 10-year Treasury yields over Japanese bond
yields widened to the most in almost a month, offering another
reason for dealers to get behind dollar strength against the
yen.
Gold was nearly unchanged at $1,267.35 an ounce <XAU=>
after hitting a record high of $1,274.75 on Tuesday.
U.S. crude fell for a third straight day, down 0.5 percent
to $75.64 a barrel <CLc1>, after Enbridge said U.S. regulators
have agreed to a Friday restart of the company's biggest
pipeline from Canada, restoring crude supplies to Midwest
refiners.
(Additional reporting by Hideyuki Sano in TOKYO; Editing by
Nick Macfie)
