TOKYO, Aug 29 - The yen firmed on Friday after upbeat Japanese economic data reignited a rally in Tokyo stocks, but wariness about intervention by the Japanese authorities held the currency back to some extent. At 0243 GMT, the dollar stood at 117.04/09 yen , down from 117.34/42 yen in late New York. The yen touched a six-week high of 117.03 per dollar after the Nikkei share price average <.N225> pushed higher in the wake of surprisingly strong Japanese industrial output data. At midsession the Nikkei was up 0.69 percent or 70.52 points at 10,295.74.
Dealers said the yen's gain had been modest as they expected the Japanese authorities to intervene at any time to push it down, despite recent signs of improvement in Japanese economic fundamentals. "The yen could overshoot briefly, although we think it will gradually calm down in the long run," said Kiichi Murashima, economic and market analysis director at Nikko Citigroup. Japan's top financial diplomat, Zembei Mizoguchi, said that even though there were signs of improvement in the Japanese economy, it was not especially strong in comparison with other leading countries. "It's not appropriate to only look at the Japanese economy, we need to see it from the standpoint of world economies," Mizoguchi, vice finance minister for international affairs, told reporters. Japan still had deflation, so the economy still needed support, he said.
Takashi Toyahara, a manager at Nomura Securities, said overseas investors who were piling into equities would still be sellers of dollars. But he added: " Given the possibility of intervention, I don't expect the dollar to keep falling that far."
MIXED DATA
An avalanche of Japanese data on Friday was mixed on the whole. Although output attracted the most attention, some traders noted that consumption, which accounts for about 55 percent of Japan's gross domestic product, still looked weak, with unseasonably cold weather over the last two months not helping. Japanese retail sales fell for the 28th straight month in July, dropping a preliminary 3.0 percent from a year earlier. Average spending by households of wage earners, a key gauge of personal consumption, fell a real 6.0 percent in July from a year earlier. Currency traders said they were waiting for the Japanese Finance Ministry's intervention figures for August, due at 1000 GMT, to see how aggressively the Japanese authorities have acted to halt the yen's latest surge, which could derail Japan's export-reliant economic recovery. The market was also looking forward to a speech by U.S. Federal Reserve Chairman Alan Greenspan and a Chicago-area purchasing managers survey, both due at 1400 GMT. The euro was steady against the dollar, consolidating after a recent selloff.
The single currency was hovering around $1.0890 , about a cent above four-month lows set earlier this week. The euro stood at 127.35/47 yen versus 127.65/76 yen in New York.//