* Japan stocks set for largest weekly gain in 2 months
* Exporters may cap dollar at 86 yen
* When will Japan intervene again?
By Kevin Plumberg
HONG KONG, Sept 17 (Reuters) - Global stock markets were on
their way to a third week of gains on Friday, with emerging
markets favoured, while the threat of Japanese intervention
kept the yen close to its lows for the month.
Japanese stocks were poised for the largest weekly gains in
two months following Tokyo's aggressive yen selling on
Wednesday, which may have totalled as much as 1.9 trillion yen,
and repeated pledge to do more if necessary.
Still, that has been mostly catch up with other advanced
markets after underperforming most of the current quarter.
"In addition to the fact that investors aren't still
entirely sure about the outlook for the global economy, they
are also closely watching whether there would be any comments
from the United States on Japan's currency intervention," said
Hiroaki Kuramochi, chief equity marketing officer at Tokai
Tokyo Securities in Tokyo.
The Nikkei share average was up 0.7 percent on the day
<> and has gained 3.7 percent this week after yen selling
intervention brightened the prospects of exporters.
The MSCI index of Asia Pacific shares outside Japan edged
up 0.3 percent <.MIAPJ0000PUS>, led mainly by the materials
sector as investors scooped up cheaper stocks after a sell-off
on Thursday.
The MSCI all-country world stocks index <.MIWD00000PUS> was
up 1.7 percent so far this week, on track for the third week of
gains. Emerging market stocks, up 2.1 percent in the week, have
been a big contributor.
CHINA FOCUS
Chinese stocks will be a focus for investors after domestic
media reported the country's banking regulator was not planning
on raising capital requirements, contrary to other reports
earlier in the week.
China set the mid-point of the yuan's daily trading range
<CNY=SAEC> at a new high for the sixth consecutive day. This
came on the heels of U.S. Treasury Secretary Timothy Geithner's
vow to the U.S. Congress to rally other world powers to push
Beijing to move faster on the yuan. []
China's guiding hand to lift its currency has been a signal
for other Asian policymakers earlier in the year to allow their
own currencies to strengthen. However, Japan's intervention
this week along with doubts about the pace of global recovery
appears to have changed that trend.
In currency markets, the U.S. dollar was nearly unchanged
on the day at 85.70 yen, still within spitting distance of its
overnight high around 85.93 yen <JPY=>.
Short-term investors have begun to close out of their bets
on yen strength after Wednesday's nearly 3 yen gain in the
dollar. However, Japanese exporters may sell dollars near 86
yen, putting a lid on dollar strength, a trader said.
"The real key positioning is probably what the corporates
and Japanese investors need to do and I think there are still
corporates out there that need to sell," said Greg Gibbs,
currency strategist at Royal Bank of Scotland in Sydney.
The euro's performance against the yen will also be watched
on Friday, after the single currency rallied some 0.6 percent
against the dollar on Thursday after auctions of 10- and
30-year Spanish government bonds produced lower yields than a
previous sale in June.
The euro was at 112.07 yen, steady on the day <EURJPY=R>.
The yield on the 10-year U.S. Treasury note was largely
unchanged on the day at 2.76 percent after climbing 4 basis
points on Thursday after a drop in initial jobless claims.
Still, the spread of the U.S. 10-year yield of the same
maturity Japanese government bond has widened 7 basis points
this week, helping Japan's cause to pull down the yen.
(Additional reporting by Charlotte Cooper and Aiko Hayashi in
TOKYO; Editing by Alex Richardson)
