LONDON, Oct 23 - The yen climbed to its highest in nearly a week against the dollar on Wednesday and surged against the euro, as policy confusion out of Japan wrong-footed investors who had bet against the Japanese currency. Prime Minister Junichiro Koizumi threw his weight behind his embattled financial chief Heizo Takenaka as political opposition to radical banking sector reform grew and sparked speculation that harsh bank reforms and mass bankruptcies might be avoided.
Some in the market attributed the yen's rise to the fact Japan seemed, for now, to have avoided drastic steps which could harm the fragile economy even more in the short term. But others said the yen's jump was more technical. "Overnight the indications are a lot of this has come from momentum traders who tried to jump on the back of yen weakness yesterday and reversed their positions today," said Rob Hayward, senior currency analyst at ABN Amro.
"It doesn't seem to be real money going into Japan on the basis that there's light at the end of the tunnel. At some point we may see that but I don't think we've seen that yet." By 0856 GMT the yen had leapt a full yen from late New York levels to 124.15 yen per dollar, 1-1/2 yen above a four-month low hit on Monday.
It also scored a full yen against the euro, rising to 121.34 yen from late New York trade. The euro held in a tight range just below $0.98, little changed from late Tuesday//www.forbes.com