An upbeat business survey on Thursday pushed up Tokyo shares, and U.S. bonds jumped after the Federal Reserve promised a "measured" approach to future rate moves after raising interest rates by a quarter point, as expected. The Nikkei average <.N225> was up 0.5 percent at 11,918.51 by the midday break, pushing into territory last reached in late April. Toyota Motor Corp. <7203.T>, Japan's biggest auto maker, was up 1.36 percent to its highest intraday level since March 2001. But banks sagged after Goldman Sachs cut its view on the sector to "neutral" from "attractive". Number-four lender UFJ Holdings <8307.T> dropped 6.02 percent. The banking sub-index <.IBNKS.T> was 2.04 percent lower. Other Asian share markets were mixed. By 0220 GMT, Singapore's Straits Times Index <.STI> was 0.71 percent higher, but South Korea's KOSPI <.KS11> was lower by the same amount. An MSCI index of non-Japan Asian share markets <.MSCIAPJ> was flat. The dollar sagged, extending losses marked after the Fed raised its key rate to 1.25 percent, its first increase in four years.
Forex traders had hoped the U.S. central bank would suggest sharper rate increases to come, and Japan's strong "tankan" report of business sentiment raised traders' expectations for a sustained yen rally. "I think it's a positive shock," said Jake Moore, forex strategist at Barclays Bank. "This could lead to a decent move in favour of the yen ... you could have a situation where yields move up and therefore I think dollar/yen is going to go down to 107.50 yen very quickly." The dollar fell to 108.08 yen versus around 108.80 in late New York trade. The tankan also supported the yen against the euro, with the Japanese currency at around 131.54 yen per euro , firming from 132.64 yen in late trade. Against the single European currency, the dollar was at $1.2169 , slightly stronger than overnight levels.
TANKAN SURPRISE
The business barometer for large manufacturers in the Bank of Japan's quarterly tankan survey, one of the most important indicators on the Japanese economy, improved to plus 22 in June from plus 12 in March, beating the consensus forecast of plus 17. The index for large non-manufacturers was plus 9, better than the plus 5 reading in March and matching the median forecast. Japanese government bond (JGB) prices fell on the strong report. The key September JGB futures contract <0#2JGB:> was down 0.75 point at 134.35. The benchmark 260th 10-year cash bond <0#JPTSY=JBTC> yield was up 8 basis points to 1.855 percent. August crude oil was at $36.85 a barrel, down more than half a percent from the U.S. close. Oil prices rebounded more than $1 a barrel in New York after a surprising drop in crude supplies last week and comments from the oil minister of Saudi Arabia, the top world oil exporter, that the market has now reached a fair value. Spot gold was flat in Asia after rising $1.50 in the United States, trading at $394.00 an ounce.///