Yen builds on gains, stocks swing ahead of US jobs report

The yen strengthened further Thursday on worries about the global economy and Japanese stimulus, while stock traders moved cautiously ahead of the release of US jobs data at the end of the week.

Japanese Prime Minister Shinzo Abe on Wednesday said he would put back by more than two years a planned sales tax increase that threatened the country's torpid economy.

However, while the move would give the government and central bank breathing room to kickstart growth, he failed to come up with any detailed plans to do so, while analysts said the delay had dampened any chance of any near-term stimulus measures.

"There's now less chance of more Japanese monetary policy, particularly when Abe said he's thinking about doing more fiscal initiatives," Tony Farnham, Sydney-based analyst at Patersons Securities, told Bloomberg News. "That should have the US dollar on the back foot for a period of time."

In afternoon trade the dollar bought 109.01 yen, down from 109.53 yen Wednesday and well off the levels above 111 yen seen earlier in the week.

The stronger currency hit Japan's Nikkei index as exporters sank, with the bourse down 2.3 percent by the close.

Investors were also pushed towards the yen -- which is considered a safe bet in times of crisis -- by worries about Britain's future in the European Union after a poll showed a majority of voters favouring an exit.

There is widespread expectation that a break from the 28-country union will spur significant market turmoil and slow or stall the British economy. The pound was at $1.4447, down from $1.4478 Wednesday and well off the $1.4636 Monday.

- Oil meeting in focus -

Attention is now turning to the Friday release of a US jobs report, with a strong reading likely to raise expectations the Federal Reserve will lift interest rates when it meets for its next policy meeting this month.

Equity dealers remain wary, with markets moving in and out of positive territory. Hong Kong finished 0.5 higher, Shanghai ended up 0.4 percent, Sydney fell 0.8 percent and Seoul was up 0.1 percent.

In early European trade London rose 0.2 percent, Frankfurt eased 0.1 percent and Paris dipped 0.2 percent.

"Caution looks set to remain supreme ahead of this week’s payrolls report," Cameron Bagrie, chief economist in Wellington at ANZ Bank New Zealand, said in a client note.

"Modest economic signals out of the US set the tone and maintain the market erring toward rates moving up, but not really excitable enough to buoy the dollar."

Oil prices also drifted ahead of a closely watched meeting of the OPEC crude exporters' group later in the day.

However, there is little expectation of a deal to cap or cut production, with Iran already declaring it is unwilling to take part in any such deal at the talks in Vienna.

In afternoon trade West Texas Intermediate was down 0.2 percent and Brent was flat.

- Key figures at 0800 GMT -

Tokyo - Nikkei 225: DOWN 2.3 percent at 16,562.55 (close)

Shanghai - Composite: UP 0.4 percent at 2,925.23 (close)

Hong Kong - Hang Seng: UP 0.5 percent at 20859.22 (close)

London - FTSE 100: UP 0.2 percent at 6,201.97

Euro/dollar: UP at $1.1196 from $1.1187 on Wednesday

Dollar/yen: DOWN at 109.01 from 109.53 yen

New York - Dow: FLAT at 17,789.67 (close)