* Japan stocks post largest weekly gain of 2010
* Exporters may cap dollar at 86 yen
* When will Japan intervene to sell yen again?
* Gold strikes record high for third day this week
By Kevin Plumberg
HONG KONG, Sept 17 (Reuters) - Global stock markets were on
track for a third week of gains and high-yielding currencies
strengthened on Friday, while the threat of Japanese
intervention kept the yen close to its low for the month
against the dollar.
European stock markets climbed at the opening, with the
leading European stocks <FTEU3> up +0.78 in early trade.
Japanese stocks posted the largest weekly gain of the year
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 catch up with other advanced markets,
which have also been rising in September, after underperforming
during most of the current quarter.
The Nikkei share average led Asian markets, finishing 1.2
percent higher on the day <> and up 4.2 percent this week,
the biggest weekly gain since December 2009, after yen selling
intervention brightened the prospects of exporters.
"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 MSCI index of Asia Pacific shares outside Japan rose
1.2 percent <.MIAPJ0000PUS>, with buying spread out across the
energy, materials and technology sectors.
The MSCI all-country world stocks index <.MIWD00000PUS> was
up 1.9 percent so far this week, on track for the third week of
gains. Emerging market stocks, up 2.6 percent in the week
<.MSCIEF>, have been a big contributor.
CHINA FOCUS
China also 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 stepped
up efforts by officials in Asia and Latin America to fight
their own currencies from appreciating appear to have halted
the trend, at least for now.
"Policy bias across Asia ex-Japan (AXJ) is still for
monetary tightening. In Japan, the focus is still on the extent
and means of further monetary easing," Standard Chartered
currency strategists said in a note.
"We view these extremely elevated levels in yen vs AXJ
currencies as a strategic buying opportunity in AXJ now that
the risk-reward dynamics in USD-JPY appear to have changed."
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=>. Japanese exporters may
sell dollars near 86 yen, putting a lid on dollar strength.
"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 rose 0.4 percent to $1.3132 <EUR=> to a one-month
high, lifted by long-term investors encouraged after auctions
on Thursday of 10- and 30-year Spanish government bonds
produced lower yields than a previous sale in June.
Higher-yielding currencies such as the Australian dollar
also rose as stock markets steadily increased during the
session and commodity prices gained.
The yield on the 10-year U.S. Treasury note was largely
unchanged on the day at 2.77 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 over the same
maturity Japanese government bond has widened 7 basis points
this week, helping Japan's cause to pull down the yen.
Gold rose 0.5 percent to a record high of $1,277.75 an
ounce <XAU=>. The precious metal usually associated with safety
had advanced earlier in the week on speculation the Federal
Reserve would have to ease policy further, but the persistent
gains suggest the rally has taken on a life of its own.
(Additional reporting by Charlotte Cooper and Aiko Hayashi in
TOKYO; Editing by Ron Popeski)
