Dollar surges to multi-year highs on yen in Asia

The US dollar surged in Asian trade on Friday after topping the 100 yen level for the first time in four years, but analysts warned that the Japanese unit's sharp drop was a double-edged sword. The greenback changed hands at 101.00 yen in afternoon Tokyo trade against 100.55 yen in New York Thursday afternoon -- it was last above 100 yen in April 2009 and plunged to a record low around 75 yen in late 2011. Tokyo's Nikkei 225 stock index soared Friday as investors eyed the weaker Japanese currency as a boom for exporters because it makes them more competitive overseas and inflates the value of foreign income. The yen's 30 percent plunge against the dollar since late last year comes on the back of the Japanese government's efforts to drag the world's third-largest economy out of a deflationary spiral that has crimped private spending and business investment, translating into years of tepid growth. And the yen's fall has accelerated in the wake of the aggressive bond-buying program unveiled in April by the Bank of Japan that some say dwarfs the size of US quantitative easing. The euro also climbed against the Japanese currency Friday at 131.74 from 131.17 in New York, while the single European unit was nearly flat on the dollar at $1.3042 from $1.3044. While currency watchers widely expected the dollar to bust the 100-yen mark, it comes amid international concern that Tokyo may set off a so-called currency war in which rival nations push down their currencies to boost exports. Japanese officials have repeatedly said the stimulus measures are only aimed at strengthening the nation's stagnant economy. "We are not touching on the currency market but rather trying to exit from deflation," Finance Minister Taro Aso told reporters Friday before boarding a plane to attend a G7 meeting in Britain. However, some observers have warned that Tokyo's policy of big spending and aggressive central bank monetary easing could backfire, inflating Japan's national debt which is already the worst in the industrialised world at more than twice the size of the economy. "The cheaper yen certainly has a positive impact on Japanese companies but for the Japanese economy to take off it may not be enough," said Hisao Matsuura, strategist at Nomura Securities. A weakening currency makes imports more expensive, affecting petrol and food prices, which would weigh on domestic demand while Japanese firms must also account for higher costs of materials purchased overseas and rising energy bills, Matsuura said. Masamichi Adachi, senior economist at JPMorgan, said the dollar above 100 yen was "what everyone had expected and there is no surprise in it". "But in terms of its impact on the Japanese economy, it's definitely positive in the short-term," he said. Prime Minister Shinzo Abe has faced pressure from the Organisation for Economic Cooperation and Development and the Group of 20 leading economies to present a plan toconfront Japan's staggering public debt, which would involve austerity measures that run counter to current policies. Japan has also been the target of veiled warnings from the United States and Europe, as well as emerging economies, over the yen's sharp fall. Last month, Washington warned Tokyo "to refrain from competitive devaluation and targeting its exchange rate for competitive purposes". The International Monetary Fund and the G20 have both given approval to the BoJ effort, but they too have cautioned over the currency war risk. The dollar's rise past the 100-yen line Thursday was also driven by improved US economic data, including unexpectedly strong jobs market numbers. Thursday's Department of Labor report -- which showed fewer unemployment benefits claims than expected -- likely gave the dollar a boost, analysts said. The dollar was also higher against other Asia-Pacific currencies. It gained to 29.62 Thai baht from 29.54 baht the previous day, to Tw$29.58 from Tw$29.40 and to 41.13 Philippine pesos from 40.78 pesos. The greenback rose to Sg$1.2357 from Sg$1.2288, to 54.50 Indian rupees from 54.28 and to 9,734 Indonesian rupiah from 9,727 rupiah. The Australian dollar changed hands at $1.0084 compared with $1.0235, while the Chinese yuan fetched 16.45 yen from 16.09 yen.