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Dollar jumps to

six-month highs

in Tokyo

TOKYO: The dollar and the Tokyo stock market both jumped to six-month highs on Wednesday, raising optimism over the outlook for Japan's sputtering economy.

It was the greenback which led the way.

A dramatic dollar spurt in early Tokyo trade saw the U.S. currency reach 99.05 yen, its highest level against the yen in six months, although it later retreated below the 99 yen level.

The weaker yen, which makes Japanese exports more competitive, swept Tokyo stocks higher, taking the key Nikkei average swiftly through the key 18,000 point barrier in the second-biggest single-day gain this year.

The Nikkei ended the day up 706.01 points, or four percent, at 18,158.73, its highest close since February 22.

Trading volume soared to 1.1 billion shares, the heaviest this year and nearly twice the number traded on Tuesday.

Dealers said foreign investors were big buyers, going for blue-chip stocks such as electronics firms which rely on exports.

They said they expect prices to keep soaring in line with the dollar's strength against the yen, as the exchange rate is expected to help Japanese companies post higher earnings.

"What is happening to the yen and the rise in the stock market is putting optimism back into the business community," said Naofumi Kinoshita of the First National Bank of Chicago's Tokyo branch.

Japanese government officials also greeted the dollar's strength on Wednesday with enthusiasm.

Japan's chief cabinet secretary, Koken Nosaka, was quoted as saying he welcomed the yen's recent weakness against the dollar and expected the dollar to climb to 100 yen.

Jiji news agency quoted Nosaka as telling reporters that the dollar's rise is "a good trend".

The dollar had built on bullishness seen in New York currency trade overnight after the central banks of the United States, Japan and Germany intervened together in foreign exchange markets to buy the dollar.

"You really can't give any forecasts (for how far the dollar will rise) as we didn't expect (the central banks) to do that much," a manager at one of Japan's major city banks said.

Tuesday's aggressive buying spree by the Bank of Japan (BOJ), the German Bundesbank and the U.S. Federal Reserve, coming when markets had wound down for summer holidays, caught many operators off guard.

It left dealers with the impression that the world's key central banks are now serious about seeing a strong dollar.

"We really didn't expect the Bundesbank to take part. The fact that Buba was in along with the Fed and the BOJ really has had an impact," said one trust bank dealer in Tokyo.

The present rates would bring the U.S. currency back to about where it started the year, before a headlong plunge that saw it sink to a record low 79.75 yen in mid-April.

The dollar has risen in fits and starts since then due to a number of factors: joint buying by major nations, interest rate cuts in Germany and Japan, cooling trade tensions between Tokyo and Washington, and Japanese government incentives to get investors to buy more dollars.-Reuter