Pumped up yen puts Nikkei on ropes

THE soaring yen continued to put pressure on

The yen was still on steroids as it rose to its highest level against the US dollar since last September.

The potential impact of the currency's 12% appreciation this year on sales of the country's major exporters sent the Nikkei 225 index down 226.30 points to 10,375.15, annihilating Friday's rally.

A 108% surge in Japan's current account surplus in May, which was propelled by recovering exports, counted for little as investors instead looked at Friday's gloomy US index of consumer confidence, which was at a seven-month low. This put shares of consumer goods exporters such as Sony and Canon back into the line of fire, while the general world telecoms malaise saw mobile phones giant NTT DoCoMo down to a 10-month low. Currency woes continued to hold back other Asian markets.

In South Korea, motor manufacturers, which rely heavily on the US market for sales, skidded almost 4% as the won added to its 12% advance against the dollar this year. The Kospi lost 9.41 to 783.52.

Taiwan's Weighted Average flailed around, and by early afternoon was down 21.50 points to 5395. The local dollar is at 14-month highs despite government intervention.

Analysts are warning that the strength of Asian currencies will slice into sales, while the lack of demand in the US and other markets will make it impossible to raise prices to protect profits from unfavourable currency conversions.

Andy Xie, regional economist for Morgan Stanley, warned that the pumping up of currencies is now a big risk to growth in Asia.

'The region is experiencing currency appreciation without any improvement in pricing power,' he said. 'This has not happened before and constitutes a serious threat to the economic recovery. The cause is the decoupling of export and investment cycles, as the Tiger economies are losing competitiveness to China.'

Today, China reported that exports in the second quarter surged almost 15%, as the country's gross domestic product accelerated to 8%, up from 7.6% in the first quarter.

Hong Kong investors were standing aside after the official launch of the Bank of China (Hong Kong) initial public offering at the weekend. The branch of the mainland giant is offering shares worth £1.8bn, making it the year's biggest float.

As other banks slid on signs of rising bankruptcies and bad loans, the Hang Seng index fell 66.64 points to 10,581.66.

Singapore's stocks drifted lower as traders sold electronics counters and the Straits Times index dropped 4.33 points to 1,609.76.

Growing concern that US markets are now in the grip of the bear once more kept Sydney investors at bay and the All Ordinaries index fell 10.7 points to 3135.3.

Malaysian stocks continued their journey to nowhere as the Kuala Lumpur Composite dropped 0.72 point to 739.13. Thailand's SET index lost 1.30 points 399.36, but the Jakarta Composite in Indonesia put on 1.28 points at 480.90.

Prices and indices in this section are supplied from various sources and calculated at different times and may not always match those listed in the tables.