Hong Kong, Aug. 13 (BridgeNews) - The yen weakened across the board in Monday morning trade as a sharp drop in Japanese stock prices encouraged market players to sell the Japanese currency. The dollar/yen's rise was also aided by a decrease in Japan's current account surplus and a rumor that Furukawa Electric Co. needed to buy U.S. dollars to acquire the optical fiber manufacturing unit of Lucent Technologies Inc. Dollar/yen rallied from 121.93 to 122.50 as the Nikkei fell sharply to a post-bubble intraday low of 11,417.70.
The sharp drop in stock prices came on the back of concerns over corporate earnings, triggered by the announcement on Friday of a poor outlook for major micro-chip maker Rohm Co.
The benchmark index closed the morning session down 243.76 points, or 2.08%, to 11,491.30.
Also giving the pair a boost was a fall in Japan's current account surplus for June as well as a rumor that Furukawa needed to buy dollars to finalize its deal with Lucent.
Japan's current account balance in June was in surplus by 771 billion yen, down 40.5% from a year earlier, the Finance Ministry said Monday. The current account surplus has declined every month since December. Furukawa and Lucent announced in late July that Furukawa would pay $2.5 billion to purchase Lucent's optical fiber manufacturing unit. Trading was relatively quiet with many big corporations closed for summer holidays this week and as the market awaits the outcome of the Bank of Japan's policy board meeting that will conclude Tuesday.
The Financial Times reported Monday that pressure on the BOJ for a further easing in monetary policy at its meeting Monday and Tuesday has increased considerably after the International Monetary Fund reversed an earlier growth forecast and warned that Japan would enter a recession this year.
In other currency trading, euro/dollar traded in a range of 0.8925-0.8941.
German press items focussing on downward revisions in European economic weakness saw some downward pressure on the pair. This was offset by euro/yen buying caused by the yen's weakness. The cross firmed to 109.32 from 108.94 at Friday's New York close.