Japanese Yen Drops as Sell-Off Continues

Japanese Yen Drops as Sell-Off Continues

A wave of coordinated intervention by the world's financial powers sent the Japanese yen plunging Friday after the G-7 agreed to take steps to curb the Japanese currency's post-earthquake surge.

The US dollar traded at 81.41 yen at 7:00am Eastern Time, compared to 79.14 yen shortly before the G-7 announcement in early Asian trading hours.

Most of the dollar's jump came in the wake of the announcement in Asia, with the Bank of Japan stepping in aggressively to sell the yen versus the dollar. European central banks also joined in.

In a statement, the UK's Treasury said that the Bank of England intervened in the foreign currency markets "to give effect to the G-7 finance ministers' communique."

A spokeswoman for Germany's Bundesbank confirmed that the institution was also participating in the intervention. Traders said action was seen by the Bank of France and the European Central Bank (ECB). Spokespersons for the Bank of France and ECB did not immediately respond to requests for comment.

The yen was sharply lower versus all major rivals Friday. The euro traded at 114.74 yen, up from 110.93 yen, while the British pound climbed to 131.17 yen from 127.69 yen.

The Australian dollar, which was hit hard as the yen rose in the aftermath of the quake, jumped to 80.66 yen from 77.55 yen, and the Swiss franc surged to 90.18 yen from 88.08 yen.

The dollar index, which measures the greenback against a basket of six currencies, traded at 75.891, compared to 75.992 in late North American trading Thursday.

The yen hit a record high against the dollar early Thursday in Asia, raising speculation of intervention as Japan struggled to cope with the aftermath of last week's massive earthquake and tsunami.

The yen's surge was seen as particularly unwelcome because the nation was expected to rely on its export sector to help dig out of the economic hole left by the earthquake, tsunami and still-unresolved nuclear crisis.

Traders tied the yen's surge to a number of factors, including expectations of large-scale repatriation of overseas investments, the unwinding of yen-funded carry trades and the Japanese currency's traditional status as a safe haven during turmoil and uncertainty.

Further intervention was likely over the course of the day, with the Federal Reserve and the Bank of Canada expected to join in selling the yen as North American trading activity gets underway.

The dollar's rebound against the yen Friday put the pair back just below the trading level seen before the earthquake struck.

The weakening yen boosted Japan's exporters Friday, causing the Nikkei Stock Average to jump 2.7 percent to 9,206.75 at close of Tokyo trading. However, it still ended the week with losses of more than 10 percent.

News of the intervention had a knock-on effect for the rest of the region, with Sydney rising 1.67 percent, or 77.42 points, to 4,716 at market close. Hong Kong was up 0.07 percent at market close, while Shanghai added 0.33 percent.