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Yen builds on gains, stocks swing ahead of US jobs report
[HONG KONG] The Japanese yen strengthened further on Thursday on worries about the global economy and Japanese stimulus, while stock traders moved cautiously ahead of the release of US jobs data at the end of the week.
Japanese Prime Minister Shinzo Abe on Wednesday said he would put back by more than two years a planned sales tax increase that threatened the country's torpid economy.
However, while the move would give the government and central bank breathing room to kickstart growth, he failed to come up with any detailed plans to do so, while analysts said the delay had dampened any chance of any near-term stimulus measures.
"There's now less chance of more Japanese monetary policy, particularly when Abe said he's thinking about doing more fiscal initiatives," Tony Farnham, Sydney-based analyst at Patersons Securities, told Bloomberg News. "That should have the US dollar on the back foot for a period of time."
In morning trade the dollar bought 109 yen, down from 109.53 yen Wednesday and well off the levels above 111 yen seen earlier in the week.
The stronger currency hit Japan's Nikkei index as exporters sank, with the bourse down 2.3 per cent by the break.
Investors were also pushed towards the yen - which is considered a safe bet in times of crisis - by worries about Britain's future in the European Union after a poll showed a majority of voters favouring an exit.
There is widespread expectation that a break from the 28-country union will spur significant market turmoil and slow or stall the British economy. The pound was at US$1.4426, down from US$1.4478 Wednesday and well off the US$1.4636 Monday.
Attention is now turning to the Friday release of a US jobs report, with a strong reading likely to raise expectations the Federal Reserve will lift interest rates when it meets for its next policy meeting this month.
Equity dealers remain wary, with markets moving in an out of positive territory. Hong Kong was flat in the morning, Shanghai edged up 0.2 per cent, Sydney fell 0.9 per cent and Seoul was 0.1 per cent higher.
"Caution looks set to remain supreme ahead of this week's payrolls report," Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand, said in a client note.
"Modest economic signals out of the US set the tone and maintain the market erring toward rates moving up, but not really excitable enough to buoy the dollar."