Yen slumps vs. dollar on government intervention

Japanese stocks spurted as the yen plunged against the US dollar on the first government intervention in the foreign currency market since March 2004 and pledged to do more if needed to preserve its export-led recovery. A stronger yen erodes the competitiveness of the exports that are the key driving force behind Japan's economy. The yen plunged to 85.78 per dollar from a 15-year high of 82.88. Exporters benefited from a weaker yen, sending the benchmark Nikkei 225 Stock Average up 6% during the week to 9,626.



The yen fell to a five-week low against the euro on Friday as investors resumed their purchases of risk financial assets like stocks and emerging market currencies amid hope that the key economies will not slip back into recession. Wednesday's step came a day after Prime Minister Naoto Kan won a re-election as the head of the nation’s ruling party, beating a candidate who had specifically called for intervention.

Japan’s currency was headed for a weekly loss against all of its 16 major counterparts and the euro was poised for its biggest weekly gain against the dollar since May 2009. The dollar declined to $1.339 per euro from $1.3078, after touching $1.3159, the weakest since Aug. 11. The dollar index, used to measure the US currency against six major rivals, was headed for its biggest weekly decline since May 2009, dropping 2.1%. The index touched 80.865, the weakest since Aug. 10.