The yen edged near to a 15-year high against the dollar on Thursday as investors bet on the Japanese authorities are not yet ready to curb the currency's strength, while world stocks and crude prices rose.
Japan's Finance Minister Yoshihiko Noda said the ministry was conducting simulations on forex intervention, though the Japanese currency hardly budged as the perception remains that Tokyo is unlikely to intervene until the US currency falls near 80 yen.
Noda's comments were also undermined as Bank of Japan Governor Masaaki Shirakawa said he did not talk about currencies and monetary policy at a government meeting.
"Comments from Japanese authorities indicated they are not in a hurry to intervene, so new (dollar) lows should be tested," Roberto Mialich, currency strategist at UniCredit in Milan, said.
The dollar fell 0.2 percent to 83.71 yen on Thursday to near a 15-year low of 83.34 yen hit on trading platform EBS on Wednesday, and is down 9.9 percent against the Japanese currency this year which is buoyant on the back of global growth concerns.
The euro eased 0.2 percent to 106.45 yen, hovering near a nine-year low. The single currency pared losses against the dollar to trade flat at $1.2717, helped by comments from European Central Bank Governing Council member Yves Mersch that the euro zone was on the brink of a sustainable recovery.
STOCKS HIGHER
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Mersch's remarks also helped European shares, with the FTSEurofirst 300 up 0.4 percent, while Germany's VDAX-NEW volatility index, a gauge of investors' fears, eased 2.3 percent.
"Equity markets are getting used to the reality that economies are slowing quite significantly. The question is how much growth is required now to support equity markets," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin.
Illustrating the current dilemma, Deutsche Bank board member Juergen Fitschen said the risk of a credit crunch in the real economy has not abated as demand for loans rises, spurred by a rebound in the aftermath of the financial crisis.
World stocks measured by MSCI All-Country World Index put on 0.3 percent. The index, which carried a 12-month forward price-to-earnings of 11.23 against a 10-year average of 15.22, is down 2.5 percent this year.
In Asia, Japan's Nikkei average rose 0.8 percent.
Oil rose to trade above $75 a barrel, drawing strength from an initial report of falling U.S. inventories.
"There are tentative signs of improving demand from what we saw last week," said Stefan Graber, a commodities analyst with Credit Suisse in Singapore. "That could suggest demand conditions are firming indeed."
Gold , however, steadied, and yields on benchmark 10-year German Bunds rose 2 basis points to 2.327 percent, while those on 10-year U.S. Treasuries were up 2 basis points at 2.6735 percent.