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Nikkei slumps to 2-month closing low on yen surge

Published 09/28/2009, 03:58 AM
Updated 09/28/2009, 04:03 AM
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* Yen touches 8-month high vs dollar of 88.23 yen

* Many exporters have set dlr rate assumption near 90-95 yen

* Nikkei hits 2-month 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.

The yen jumped to an eight-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, a 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 that it booked on Friday.

The broader Topix lost 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 ($15.7 billion) and was also above the 20-day average.

One near-term downside target for the Nikkei might be 9,850, said Matsui Securities market analyst Masayuki Doshida, 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.

While the Nikkei has retreated from an 11-month intraday high of 10,767.00 hit in late August, it is still about 30 percent above an intraday low of 7,021.28 hit in March.

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

One factor that may temper the impact of the yen's rise against the dollar is the fact that the yen has not seen the same kind of jump against the euro, said Kiyoshi Noda, chief fund manager for MU Investments.

Although the yen is edging close to the 13-year peak against the dollar of 87.10 yen hit in January, it remains well below January's seven-year high against the euro of 112.08 yen, and stood at 130.82 yen to the euro on Monday.

That means the euro's exchange rate is not causing Japanese exporters the same kind of pain as the dollar's fall against the yen.

For example, although the yen has risen beyond Honda Motor's exchange rate assumption for the current fiscal year of 91 yen to the dollar, the yen remains weaker against the euro than Honda's assumption of 127 yen to the euro.

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 was 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 Chris Gallagher)

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