TOKYO, Sept 4 - The yen fell more than one percent from multi-month highs versus the dollar and the euro on Thursday after Japanese authorities apparently conducted yen-selling intervention. The Finance Ministry has not confirmed that it stepped into the market but traders said the Bank of Japan, as an agent for the ministry, was selling yen to stem the currency's export-damaging strength. The dollar shot up more than one yen to 116.80/82 yen from a 3-1/2-month low of 115.75 hit earlier on Thursday and from around 115.80 yen in late New York trade.
The euro rose about 1.5 yen from the day's low to 126.67/78 yen . It hit an eight-month low of 125.05 yen on Wednesday. Analysts say the Japanese government, which spent a record nine trillion yen ($77.65 billion) on intervention in the first seven months of this year, is determined to block the yen's rise, fearing it could derail the economy by hurting exporters. "The Japanese economy is like a bedridden man who has finally recovered but has only just started to walk a little bit," said Seiya Nakajima, chief economist at Itochu Corp. "It's clear the government doesn't want to kill the nascent recovery," he said. "I think this is an attempt to make a floor around this level." Traders said Japan wanted to protect 115 yen -- a level it has managed to defend for more than two years. The apparent intervention came as speculation grew in the market that Japan may become less aggressive about stepping in due to disapproval from Washington. The White House said on Tuesday that currency intervention should be kept to a minimum. Although the comment was thought mainly aimed at China, traders took it as a slap for Japan due to Tokyo's manipulation of the value of the yen. But Japan's forex chief, Zembei Mizoguchi, stuck to his usual line on Thursday by saying that short-term fluctuations and overshooting of foreign exchange rates were undesirable.
Still, some market players think the yen may strengthen in the end, given strong yen demand from foreign investors to buy resurgent Japanese shares. "The yen has been rising because of real fund flows," said Kota Kimura, assistant forex manager at Shinkin Central Bank. "So to counter that flow, you will need considerable power." Indeed, capital flows data released by the ministry showed overseas investors continued to pour funds into Japanese stocks, buying a net 326 billion yen ($2.8 billion) last week, underscoring a recent trend. Hidenao Miyajima, an independent analyst, estimated that about $50-60 billion of Japanese shares would be bought if overseas investors raised their weighting position to neutral. The yen's highs against the dollar earlier in the morning came as more data pointed to economic recovery in Japan.
A Finance Ministry survey showed that Japanese companies boosted spending on plant and equipment by 6.4 percent in the April-June quarter from the same period a year earlier, the first rise in seven quarters. The survey also showed that business sentiment at large Japanese firms improved in the July-September period. The euro was little changed against the dollar at $1.0843/48 . ($1=115.90 yen)//www.reutrs.com