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Nikkei slides to 2-mth closing low on yen surge

Published 09/28/2009, 02:50 AM
Updated 09/28/2009, 02:54 AM
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* Many exporters have set dlr rate assumption near 90-95 yen

* Yen touches 8-month high vs dollar of 88.23 yen

* Nikkei hits 2-mth intraday and closing level lows

* Volume and turnover pick up, both above 20-day average

By Aiko Hayashi

TOKYO, Sept 28 (Reuters) - Japan's Nikkei average slid 2.5 percent to its lowest close in two months on Monday, as a surge in the yen hit shares of exporters such as Tokyo Electron and after disappointing housing data fuelled worries about the strength of a U.S. recovery.

The yen jumped to an 8-month high against the dollar of 88.23 yen on Monday, putting heavy pressure on the exporter-heavy Nikkei, as a rise in the yen eats into exporters' overseas profits when they are repatriated.

The yen later lost some ground as Japan's finance minister tried to tone down earlier comments suggesting intervention was unlikely, remarks that had prompted speculators to pile into the yen's rise.

"Many exporters have set their currency rate assumption at 90-95 yen, and if the dlr/yen were to stay below 90 yen, the impact on their earnings would be huge and that's a concern," said Yutaka Miura, senior technical analyst at Mizuho Securities.

The benchmark Nikkei fell 256.46 points to 10,009.52, its lowest close since late July. The index, which also hit a two-month intraday low of 9,971.05, extended a 2.6 percent fall it booked on Friday.

The broader Topix shed 2.2 percent to 902.84.

Trading volume picked up on the Tokyo exchange's first section, with 2.1 billion shares changing hands, rising above the 20-day moving average. Turnover totalled 1.4 trillion yen and was also above the 20-day average.

One near-term downside target for the Nikkei might be 9,850, said Masayuki Doshida market analyst at Matsui Securities, adding that the Nikkei could fall to that level later this week.

That is near the bottom of the cloud on daily Ichimoku charts and is regarded as a support level.

In a holiday-shortened week, the Nikkei slipped 1 percent last week, although it had gained 16 percent since the beginning of the year.

"We also have growing scepticism about the sustainability of the economic recovery. Economic indicators have improved but many of them are still in negative territory," said Takahiko Murai, general manager of equities at Nozomi Securities.

Data showed August sales of new homes fell short of Wall Street's expectations on Friday, while new orders for long-lasting U.S. manufactured goods fell by their biggest margin in seven months, helping push the S&P 500 Index 0.6 percent lower.

In addition to currency moves, the market will focus on a string of economic indicators due later this week, including U.S. jobs data on Friday, market players said.

EXPORTERS WOES

Tokyo Electron's shares slid 5.2 percent to 5,520. Among other exporters, Honda Motor skidded 5 percent to 2,675 yen, while chip-tester maker Advantest Corp dropped 4.1 percent to 2,435 yen.

Sanyo Electric Co Ltd tumbled 6.4 percent to 218 yen after the company said it is likely to post an annual net loss, instead of its previous estimate of breaking even, as costs for its voluntary retirement scheme and a product recall weigh.

Mitsui O.S.K. Lines fell 5.4 percent to 521 yen after the shipping company widened its interim loss forecast due to unexpectedly higher fuel costs and terminal usage fees.

But Nippon Meat Packers climbed 2.2 percent to 1,098 yen after Mizuho Securities raised its rating to "1" from "3", saying the new government's farm policies may help weaken the Japan Agricultural Cooperatives, a main competitor for the company in its domestic meat business.

Ryohin Keikaku Co jumped 4 percent to 4,440 yen after Credit Suisse raised its rating on the operator of "Muji" clothing and home goods stores to "outperform" from "neutral," citing improved merchandise and a successful TV advertising campaign.

Declining stocks outnumbered advancing ones by more than 2 to 1. (Additional reporting by Masayuki Kitano; Editing by Joseph Radford)

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