The yen surged in London, heading for its biggest four-day rally against the dollar in six months, on speculation Japan is scaling back sales of its currency. The gain accelerated after the yen rose beyond 107.90 per dollar, triggering buying by traders who use charts to predict price movements, said Minoru Shioiri, senior manager of the treasury and foreign exchange at Mitsubishi Securities Co. in Tokyo. Finance Minister Sadakazu Tanigaki said Japan doesn't sell yen to target a specific level.
``We're watching dollar-yen collapse,'' said Jake Moore, currency strategist in Tokyo at Barclays Capital Inc. ``Half of this is technical and half is a sea change in people's thinking over what Japan can accomplish with intervention.'' Japan's currency jumped to 107.20 per dollar at 7:10 a.m. in London from 108.29 late yesterday in New York. It was as strong as 106.72, the highest since Feb. 19. The yen has risen 4.5 percent from a five-month low of 112.33 on March 8. It also strengthened to 131.72 per euro from 132.50. The yen may rise to 105 per dollar in the next month, Moore said.
Japan has sold record amounts of its currency to stem gains that threaten its export-led recovery. ``There was, at least, no apparent intervention today and I didn't see any tell-tale signs,'' said Uwe Parpart, senior market strategist at Bank of America in Hong Kong. The authorities are ``no longer pursuing any effort to weaken the yen aggressively like it seemed to be doing in early March.''
`More Patient'
The yen has gained as government reports showed an economic recovery is spreading from exports to consumer demand. A rally in Japanese stocks and speculation the nation's financial companies have been bringing money home ahead of the March 31 fiscal year end also increased demand. A stronger yen decreases earnings on overseas sales in local currency terms. Toyota Motor Corp., Asia's biggest automaker, forecast in November the yen will average 112 per dollar for the fiscal year ending March 31. The yen has averaged 113.24 per dollar so far this business year. ``Japan is more patient with the yen's appreciation now, letting the yen rise,'' said Xinyi Lu, chief strategist at UFJ Bank Ltd., a unit of Japan's fourth-biggest lender. ``The recovery is spreading to consumers and when domestic demand grows, there is less need to weaken the yen to protect exports.''
Buying Triggered
A chart that measures a currency's gains or losses relative to a series of numbers known as the Fibonacci sequence shows 107.91 yen as a 61.8 percent retracement since the yen fell to its five-month low from a 41-month high of 105.17 on Feb. 11. A yen level of 106.86 is a 76.4 percent retracement. Other key levels are 23.6 percent, 38.2 percent and 50 percent. ``A breach of the 61.8 percent Fibonacci level takes the yen back through 106 and to the low 105 level,'' said ABN Amro's Clay, currency strategist in Sydney. ``We could see that in the next couple of weeks, if not sooner.'' Traders typically place automatic sell or buy orders at these levels to limit losses in the event their bets go the wrong way. ``All those stops were triggered from 107.90, 107.80 and so on,'' Shioiri said. ``With these moves, the market sentiment for the dollar and yen looks really turned around.''
`Sluggish'
The dollar also dropped on speculation reports today will suggest the U.S. manufacturing sector growth is stalling, slowing the creation of jobs needed for the Federal Reserve to raise its key interest rate. The Fed's target rate of 1 percent is half that of the European Central Bank. The U.S. currency fell to $1.2286 per euro from $1.2236. A gauge of manufacturing in the Philadelphia region may have fallen to 29 this month from 31.4 last month, a Fed report today will probably show, based on the median of 52 forecasts in a Bloomberg News survey. The number of Americans filing initial claims for jobless benefits may have climbed last week to 345,000, a separate report today may also show, based on the median of 40 forecasts. ``A weak Philadelphia index may highlight expectations the U.S. jobs market may remain sluggish,'' said Junya Tanase, a Tokyo-based currency analyst at J.P. Morgan Chase & Co. ``Then, we can't expect the Fed to raise rates anytime soon, which puts pressure on the dollar.''
Money Flow
Demand for the yen also increased as a Finance Ministry report said Japanese investors sold 1.11 trillion yen in overseas bonds and 200.7 billion yen in overseas stocks during the week ended March 12. Overseas investors bought 129.6 billion yen ($1.2 billion) of Japanese stocks last week, after buying more shares than in any five-day period in the past three years the previous week. ``Japanese investors may have sold assets to lock in profits ahead of the March 31 financial year end,'' said UFJ's Lu. ``Both foreign and Japanese investors' money flows are adding upward pressure to the yen.'' Japan's currency may rise to 105 per dollar and 130 per euro by the end of March, he said.
Bank of Japan Governor Toshihiko Fukui said Tuesday consumer spending is growing faster than expected, helping the central bank maintain its evaluation that the world's second-biggest economy is ``recovering gradually.'' Japan's economy expanded at an annual pace of 6.4 percent in the fourth quarter, compared with a 4.1 percent expansion in the U.S. and 1.2 percent in the euro region. ``People who sold the yen on expectations of BOJ selling now had to give up their positions, boosting the yen,'' said Tsutomu Soma, a currency and derivatives trader at Okasan Securities Co. in Tokyo. The yen may rise to the low 106s today, he said. In other trading, the British pound climbed to $1.8237 from $1.8168 while the dollar weakened to 1.2739 Swiss francs from 1.2769. ///www.bloomberg.com