Update: Japan's Abe rules out intervention as yen sits at 17-month high

[TOKYO] Japanese Prime Minister Shinzo Abe has ruled out intervening in currency markets to halt a surge in the yen, despite the unit sitting near a year-and-a-half high against the dollar Wednesday.

Huge volatility on equity markets driven by worries about the slowdown in global growth have sent traders scurrying for the Japanese unit, which is considered a safe bet in times of turmoil.

The currency's turnaround is bad news for the profitability of Japanese exporters and Tokyo's broader attempts kickstart the world's number three economy.

But, in an interview with the Wall Street Journal, Mr Abe ruled out stepping into foreign exchange markets to reverse the yen's rise.

"Whatever the circumstances, we must definitely avoid competitive devaluation, and I think we should refrain from arbitrary intervention in currency markets," Mr Abe said in response to questions about the yen's recent advance.

His remarks supported the unit, which on Tuesday briefly broke the 110 level against the dollar for the first time in 17 months, erasing most of its losses since the Bank of Japan expanded its monetary stimulus programme in October 2014.

The stimulus is a key plank of Mr Abe's programme, dubbed Abenomics, to resuscitate Japan's economy.

In Tokyo afternoon trading, the yen sat at 110.38 against the greenback, compared with 110.28 yen on Tuesday in New York, where it fell below 110 yen. The dollar has tumbled from more than 114 yen since the start of the year, when world markets were hammered by worries over global growth.

The euro slipped to 125.46 yen Wednesday from 125.55 yen and US$1.1368 from US$1.1384.

"Recent market moves add to the growing sense that BoJ Governor Haruhiko Kuroda's easing programme and Mr Abenomics have both run out of options," Yasunari Ueno, chief market economist at Mizuho Securities, said in a commentary.

"The problem for Japan is that neither the government nor the BoJ appear to have a magic bullet that would halt the yen's rise." There is growing speculation that the central bank will be forced to unleash more stimulus after its meeting later this month in an increasingly desperate bid to halt a downturn in the economy.

"But unless something radical is done... it's hard to see a further nudge down in interest rates or more asset purchases doing much to reverse the (yen strengthening) trend," said Jason Wong, a currency strategist at Bank of New Zealand.

In other trading, higher-risk emerging currencies ticked higher. The oil-linked Malaysian ringgit rose 0.33 per cent against the dollar as crude prices rallied, while the South Korean won added 0.1 per cent. The Singapore dollar and Thai baht also booked healthy gains.

AFP