Yen surges as Japan upgrades nuclear emergency

TOKYO–The yen surged in Asia trade on Tuesday as Japan upgraded its nuclear emergency to a maximum seven on an international scale of atomic crises, as more aftershocks rattled nerves, dealers said.

Risk-averse foreign investors unwound positions in the higher-yielding euro to take profits and buy back into the Japanese safe-haven amid fresh concerns about the stricken Fukushima Daiichi plant.

“Overseas investors stopped taking risks,” Yuji Saito, foreign exchange market director at Credit Agricole in Tokyo, told Dow Jones Newswires.

At one stage the dollar fell by more than one yen during the course of the morning, from 84.78 yen in early trade to 83.50 around noon, compared with 84.67 yen in New York late Monday. It later eased to 83.90.

The Japanese unit also strengthened to 120.24 against the euro from 122.10.

The yen’s surge followed a Kyodo news report citing TEPCO officials not ruling out the possibility that the radiation leak from the stricken Fukushima Daiichi plant could eventually be greater than Chernobyl in 1986.

Japan on Tuesday raised its rating of the severity of the accident to the highest level on an international scale, equal to the Chernobyl disaster.

The March 11 earthquake and tsunami crippled the Fukushima plant, knocking out reactor cooling systems, triggering fires and explosions and the release of radiation into the atmosphere, contaminating farmland and seawater.

The view that the US Federal Reserve may not raise rates this year has also weakened dollar sentiment, after the greenback gained last week on hopes for an end to US credit easing.

“The view that the Fed won’t raise interest rates within this year is becoming a consensus among many people,” said Keiji Matsumoto, currency strategist at Nikko Cordial Securities.

Investors took cues from a 6.2-magnitude aftershock in Japan shortly after 8:00 am (2300 GMT Monday), a senior dealer at a major Japanese trust bank said.

In the afternoon, a powerful 6.0 magnitude earthquake struck near the Fukushima plant, shaking buildings in Tokyo. No tsunami warning was issued and no damage immediately reported.

After the 9.0-magnitude earthquake and tsunami on March 11 which killed more than 13,000 people, with around 14,500 people still missing, Japan has experienced more than 400 major aftershocks stronger than 5.0 in magnitude.

The greenback was higher against other major Asian currencies, rising to 1,093.40 South Korean won from 1,087.20 on Monday, 43.30 Philippine pesos from 42.99 and to 30.15 Thai baht from 30.06.

The US unit rose to Sg$1.2597 from 1.2560 and to 8,657 Indonesian rupiah from 8,651. It gained against the Taiwan dollar, to Tw$29.12 from 28.91.