U.S. dollar coast 114.34 yen in Asia trading

The dollar rose against the yen Friday in Asia as a recovering Japanese stock market cheered investors.

Photo: U.S. dollar coast 114.34 yen in Asia trading

U.S. dollar was trading at 114.34 yen midafternoon, up from 114.06 yen late Thursday in New York. The euro rose to US$1.4338 from US$1.4319.

When equity markets turn higher, short-term investors tend to resume risky yen carry trades, in which they borrow funds in yen to invest in higher-yielding assets denominated in other currencies. Interest rates in Japan remain the lowest among major industrialized countries.

The Nikkei 225 average added 221.46 points, or 1.36 percent, to 16,505.63 points on the Tokyo Stock Exchange

Traders said, however, the U.S. currency's gains are likely to be limited because of continued worries about the subprime loan crisis and a slowdown in the U.S. economy.

"Investors aren't in a situation where they can keep buying the dollar given recent weak earnings results of U.S. financial institutions," said Yuzo Sakai, foreign exchange controller at Tokyo Forex and Ueda Harlow. "If forthcoming results continue to underscore the seriousness of subprime loan jitters, the dollar may briefly fall to 113.00 in the near term," he said.

That would be a steep fall from Friday's Asia intraday high of 114.41.

Traders said the dollar was supported against the yen by the rise in the euro and other currencies versus the Japanese currency. Japanese investors' buying of foreign bonds also hurt the yen, they said.

But the main factor was the big recovery in Japanese shares.

"Japanese stocks have been recovering beyond investors' expectations," said Tsutomu Soma, senior trader at Okasan Securities. "As long as stocks remain firm, receding risk-aversion will likely support the dollar."

Against other regional currencies, the dollar was mostly lower, falling to 912.2 South Korean won from 916.6 the previous day, and to 7.7501 Hong Kong dollars from 7.7504. It rose to 39.525 Indian rupees from 39.36.