Intervention hints fail to halt yen

Finance Minister Yoshihiko Noda sharpened his rhetoric on foreign exchange on Wednesday as a rise in the yen underlined concerns that the currency's strength could threaten the economic recovery.

Political powerbroker Ichiro Ozawa, who is challenging Prime Minister Naoto Kan in a close-fought ruling party leadership race, later said Japan should take all possible steps to counter the rising currency including market intervention, even if solo action is ineffective.

Investors initially ignored Noda's comments and pushed the yen to a 15-year high of 83.34 yen per dollar, doubting that Japan would risk going solo and all but ruling out coordinated intervention with other Group of Seven countries.

The yen later gave back some of its gains.

A report showing Japanese machinery orders rose by the most in seven months in July did little to ease concern that a surging yen could undermine the country's important export sector, seen as critical to the recovery from the global economic crisis.

The Bank of Japan has indicated it is willing to ease monetary policy to help the economy, but is likely to bide its time until the ruling party settles a leadership contest with a vote on Sept. 14.

As the yen surged, the Nikkei average fell 2.2 percent to its lowest close in a week on worries about the potential hit to export earnings.

Japanese officials have been trying to talk down the yen but so far their comments have had little effect as it keeps rising due to concerns about a slowdown in the global economy and the health of the European banking system.

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