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Tokyo's yen move hits markets

Tokyo's yen move hits markets
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The Japanese government’s decision to sell the yen to bring it down from the latest record high against the dollar had a negative effect on share prices.

The intervention — the second in less than three months — vaulted the US currency more than four percent higher on Monday, its biggest one-day gain in three years.

The stronger dollar pulled down mining shares as it makes metals more expensive for many buyers which hits demand.

Japan’s Finance Minister Jun Azumi said Tokyo will continue to step into the market until it was satisfied with the results.

“The focus is to make it as painful as possible to hold long yen/short dollar positions,” said Sebastien Galy, currency strategist at Societe Generale.

“If dollar/yen continues to go aggressively lower then the Japanese authorities will feel the need to intervene again.”

Tokyo’s latest move since its record selling of 4.5 trillion yen (42.4 billion euros) on 4 August followed weeks of warnings by officials that intervention was possible given the yen’s strength.

Tokyo’s latest foray came just days before the Group of 20 leaders’ summit in Cannes, France.

The summit will focus on Europe’s efforts to contain its sovereign debt crisis and avoid a repeat of the financial shock that roiled markets after the Lehman Brothers collapse in 2008.

But Tokyo is keen to win G20 understanding that a strong yen is one challenge too many for an economy grappling with a nuclear crisis, a massive rebuilding effort from a March earthquake and tsunami and ballooning public debt.

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