Yen soars as Asian markets mixed

The yen soared to a fresh 15-year high against the dollar in Asia on Tuesday while regional markets were mixed amid profit-taking following strong gains in the previous session.

While the local currency weighed on sentiment, investors on Tokyo’s Nikkei were also cautious ahead of a key vote by Japan’s ruling party on a new leader, which will take place after the market closes.

Hong Kong rose 0.24 percent and Sydney added 0.50 but Shanghai shed 0.12 percent and Seoul was down 0.13 percent.

Tokyo was 0.23 percent down by the break. Japanese exporters were again sold off as the yen struck 83.25 to the dollar in morning forex trading, its lowest since May 1995 and following a slide in New York on Monday. The greenback later clawed back slightly to 83.41.

Eyes will be on the ruling Democratic Party of Japan (DPJ), which will announce after the markets close whether Prime Minister Naoto Kan has held off a challenge for his job from veteran powerbroker Ichiro Ozawa.

If Kan loses the vote, which many say is too close to call, it will mean Ozawa becomes Japan’s third premier in a year.

However, Mizuho Corporate Bank market economist Daisuke Karakama said: “Some investors are buying the yen back on media reports that Mr Kan has a lead.

“But most players are waiting to see election results in the afternoon before pushing the yen higher from here.”

In the run-up to the vote Ozawa has said he will intervene in the currency markets to weaken the yen, which has become a threat to Japan’s fragile recovery and a key political issue.

Share traders also cashed in profits from Monday’s gains that were brought about by data pointing to a strong Chinese economy as well as the release of new rules aimed at shoring up banks’ defences against another financial crisis.

Top central bankers and regulators meeting in Basel, Switzerland, on Sunday approved measures requiring banks to lift their capital reserves substantially as a buffer against future meltdown.

The new regulations, called Basel III, would force banks to more than triple their current reserves from around two percent to seven percent between 2013 and 2019.

The long timeframe eased concerns among investors that the reforms could pressure an already shaky recovery from the worst recession in decades, analysts said.

The news also sent world markets higher, with the Dow in New York up 0.78 percent and London’s FTSE gaining 1.16 percent.

On oil markets New York’s main contract, light sweet crude for October delivery, slipped three cents to 77.16 dollars a barrel while Brent North Sea crude for October added four cents to 79.07 dollars.

Gold opened at 1,248.50-1,249.50 US dollars an ounce in Hong Kong, up from Monday’s closing price of 1,244.70-1,245.70.