TOKYO, Aug 25 (Reuters) - Japan's Nikkei average is expected to fall on Wednesday to its lowest in 16 months after the yen hit a 15-year high versus the dollar as dismal U.S. housing data added to fears the global economic recovery would fizzle out.
Underlining the likelihood of a lower opening, Nikkei futures traded in Chicago closed at 8,860, down 1.2 percent from the Osaka close. In early Asia trading, the dollar recouped some ground to 84.25 on electronic trading platform EBS after hitting a 15-year low around 83.60 yen.
The Nikkei business daily reported that Japan's Ministry of Finance may consider unilateral yen-selling market intervention if speculators drive up the yen, and market players said hopes for action by the government and the Bank of Japan may provide support.
"The market will likely start the day lower after the poor U.S. housing data heightened worries about the economy and dollar/yen fell to the 83 yen level," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.
"But market hopes and demands for moves by the Bank of Japan, particularly the possibility of solo intervention, will likely help. If the central bank calls an emergency meeting, say after the morning close, the Nikkei could still swing to positive territory and go above 9,000."
The benchmark Nikkei is likely to move between 8,750 and 9,100, market players said.
It lost 1.3 percent on Tuesday to 8,995.14, its lowest close since May 1, 2009, with hedge funds and foreign investors seen selling amid mounting concern about the authorities' inaction on a strong yen, which threatens a fragile economic recovery.
The 9,000 to 9,100 area had been strong support for the Nikkei since last year, and a break below that level would likely feed downward momentum, market players say, with few technical targets to break the benchmark's fall.
One target for the Nikkei stands at 8,697, a 61.8 percent retracement of the rally between its March 2009 low and April 2010 high.
Pessimism about global growth has grown infectious in recent weeks after lacklustre U.S. employment and consumer reports. Fears were reinforced on Tuesday by a report showing U.S. existing house sales slid much more than expected in July after the government ended homebuyer tax credits.
U.S. stocks fell to their lowest level in seven weeks, while prices of U.S. Treasuries soared, sending two-year yields to another record low. ----------------------MARKET SNAPSHOT @ 2303 GMT ------------
LAST PCT CHG NET CHG S&P 500 1051.87 -1.45% -15.490 USD/JPY 84.19 0.07% 0.060 10-YR US TSY YLD 2.4933 -- 0.000 SPOT GOLD 1230.7 0.12% 1.450 US CRUDE 71.46 -0.24% -0.170 DOW JONES 10040.45 -1.32% -133.96 ------------------------------------------------------------- > Growing economic fears drive Wall Street lower > Yen posts large gains on rising risk aversion > US bonds rise, yields sink on weak economy > Gold rises on safe-haven bids after housing data > Oil slumps a 5th day as economy fears persist
STOCKS TO WATCH
-- Toshiba Corp
Toshiba plans to construct solar power projects in Europe and the United States, hoping to generate 150 billion yen in overseas sales from solar power operations in fiscal 2015, the Nikkei business daily reported.
-- Sumitomo Trust and Banking, Chuo Mitsui Trust
Sumitomo Trust and Banking said on Tuesday its stakeholders would get 1.49 shares of Chuo Mitsui Trust for each Sumitomo share in their planned merger to create Japan's largest trust bank.
-- Fujitsu Ltd
Fujitsu's former president Kuniaki Nozoe has filed a suit against the IT services firm and four executives seeking 380 million yen in damages, the latest in the dispute over his ousting last year.
-- Mitsubishi Corp
Mitsubishi Corp said it will join Penn West Energy Trust's project to produce shale gas in British Columbia, Canada, and invest about $3.5 billion in it over 15 years. (Reporting by Aiko Hayashi; Editing by Michael Watson)