TOKYO, July 10 - The yen kept an upbeat tone on Thursday as investors grew optimistic about the outlook for Japan's economy on brightening corporate sentiment, robust macro economic data and the rally in stocks. "On top of the U.S. and global stock recovery, Japanese stocks seem to have been rising for their own reasons -- that's why people have started to focus on Japan's positive fundamentals," said Kiichi Murashima, economic and market analysis director of Nikko Citigroup. "Yen-needs related to Japanese stock buying are intensifying rapidly," he said.
Foreign investors' buying of Japanese shares ballooned in June to the highest level since March 1999, reflecting hopes that the export-dependent Japanese economy would gain from a global economic recovery. Ministry of Finance data showed that foreign investment in Japanese shares amounted to 1.2544 trillion yen ($10.64 billion), the second-highest level ever after March 1999, when they bought a net 1.5987 trillion yen. Analysts said European investors were active buyers of Japanese shares, helping the yen's appreciation against the euro. The yen's uptrend in crosses was indirectly pressuring the dollar against the Japanese unit, but the greenback's bias was on the downside as gains in stock prices seemed speedier in Tokyo than in New York.
At 0224 GMT, the euro was trading at 133.63/73 yen from late New York's 133.75/86 yen. The Australian dollar fell to 76.98 yen against 77.46 yen. The dollar was at 117.78/83 yen , almost flat from 117.74/82 in late New York. It fell as low as 117.65 yen in early morning trade. The Tokyo stock market's Nikkei average <.N225> was up 0.33 percent at 10,023.91 at the end of morning trade, clawing above the psychological 10,000 mark two days after it pierced that level for the first time since August. The dollar's downside was firmly supported by worries that the Bank of Japan would step, and dealers said its move below 117 yen was unlikely. Still, it could get increasingly difficult for Japan to stop the yen's rise if stock prices continue to climb. "They (the authorities) can spend more money to slow the yen's rise, but I wonder how they can justify that judgement if Japan's economic fundamentals are improving for real," said Tohru Sasaki, chief forex strategist at J.P. Morgan Chase Bank in Tokyo.
ECB, BOE IN FOCUS
Dealers are eyeing policy-setting meetings by the European Central Bank and Bank of England later in the day, although few dealers expect them to announce rate cuts. Still, many players are hesitant to take huge positions on the slim chance that the banks might come up with a surprise and on the prospect that they may deliver hints of monetary easing in the future. The ECB last cut rates by half a percentage point in June to 2.00 percent. The euro was at $1.1346/51 against $1.1352/58. // ($1=117.80 yen). ((Reporting by Mariko Hayashibara and Yonggi Kang;