Yen recovers from tumble in aftermath of quake

AP News
Posted: Mar 11, 2011 3:41 PM
Yen recovers from tumble in aftermath of quake

The Japanese yen climbed Friday against the dollar, recovering from a brief tumble just after a massive earthquake and tsunami shook the Asian country.

Japan's quake and the resulting tsunami reverberated throughout the world. Hundreds of deaths were reported, the area around a Japanese nuclear power plant was evacuated, tsunami waves struck Hawaii and warnings remained around the Pacific.

The yen dove briefly after the quake, but then recovered as investors expect the Japanese to buy back their home currency.

The dollar fell to 81.88 Japanese yen late Friday from 83.02 yen Thursday. The dollar had risen to a three-week high of 83.30 yen in the immediate aftermath of the earthquake.

"The typical expectation, based on past experience, is for Japanese investors to repatriate funds" after a disaster, wrote Brown Brothers Harriman analysts in a research note. That means they would sell off any bets they had placed on other currencies, or bets on stocks and bonds overseas, and bring their funds back home in yen.

After another huge earthquake in Japan, in 1995, the yen gained about 20 percent against the dollar in three months.

"Businesses, banks and individuals in Japan who have invested money in stocks and bonds everywhere in the world are suddenly going to need liquidity, and maybe a lot of it" to fund the clean-up and reconstruction in Japan, said Carl Weinberg, an economist with research firm High Frequency Economics. That could increase demand for the Japanese currency and drive up its value.

The dollar has already dropped about 14 percent against the yen in the past 12 months, circling not far off its post-World War II low of 79.75 yen. The yen's climb has hurt the profitability of its exporters and weighed on the Japanese economy.

Some economists said Japan's rebuilding effort could help the economy grow faster.

The Bank of Japan is scheduled to meet Monday. The central bank said on Friday that it would "continue to do its utmost" and "stand ready to take action" as necessary to keep financial markets and institutions operating smoothly.

In other trading Friday, the euro rose to $1.3890 from $1.3794 despite continuing concerns about debt-ridden countries in Europe, and the pound rose to $1.6071 from $1.6054.

The dollar fell to 0.9298 Swiss franc from 0.9322 Swiss franc, and slipped to 97.29 Canadian cents from 97.48 Canadian cents.