Stocks higher after G-7 pledge to restrain yen
Friday, March 18, 2011; 10:47 AM
LONDON -- Global stocks rose Friday after the world's seven leading industrial nations moved to rein in the Japanese yen, whose surge to record highs this week was hurting a country already brought to its knees by natural disasters.
Oil prices, meanwhile, plunged after the Libyan government declared a cease-fire in its weeks-long clashes with rebel forces.
Investor confidence was first boosted by the coordinated effort to stabilize financial markets, which have been volatile since Japan was struck March 11 by a mammoth earthquake and tsunami that wiped out much of its industrial northeast and severely damaged a nuclear power plant.
The yen raced to record highs against the dollar due to its status as a safe haven for investors - even when the emergency is in Japan - and expected repatriation of funds for reconstruction.
The yen's rise was further hurting Japan's export-dependent economy by making its foreign sales less competitive, so much that the world's largest central banks joined forces to intervene in currency markets to bring it back down.
As a result, the benchmark Nikkei 225 in Tokyo rose 2.7 percent to close at 9,206.75, capping a turbulent week that saw stocks lose 16 percent over Monday and Tuesday.
In Europe, Britain's FTSE 100 rose 0.8 percent to 5,739.03. Germany's DAX was 1.2 percent higher at 6,735.41 and France's CAC-40 rose 1.6 percent to 3,844.97. The euro rose to $1.4129 from $1.4030 late Thursday.
Wall Street also rose on the open, with Dow Jones gaining 1.0 percent to 11,893 and the S&P 500 rising 0.9 percent to 1,285.
The G-7 coordinated currency intervention marks the first time the G-7 countries have jointly acted in currency markets since the fall of 2000, when they supported the fledgling euro.
The impact was immediate - the dollar rose above 81 yen after earlier in the day sliding as far as 76.53 yen, an all time low. It was trading at 81.06 yen in mid-afternoon in Europe.
Analysts noted that the G-7 left the door open for more interventions, as required by market volatility, suggesting a longer-term commitment to keeping the yen down.
Gareth Berry, analyst at UBS, said that while the size of the intervention was not revealed it is likely to be significant. The Bank of Japan's unilateral intervention in September was worth $25 billion on its own.