May 30, 2013 / 1:57 AM / 4 years ago

Nikkei slumps below 14,000 as yen strength fans bleak mood

* Strong yen exacerbates already sour mood - analyst
    * Exporters hit by yen strength
    * Fed stimulus outlook key for market direction - analyst

    By Ayai Tomisawa
    TOKYO, May 30 (Reuters) - The Nikkei share average fell more
than 3 percent to break below 14,000 on Thursday morning as the
dollar dropped to its lowest level against the yen in nearly
three weeks, triggering a sell-off in exporters.
    The benchmark Nikkei fell 3.0 percent to 13,949.05
in mid-morning trade after dropping as low as 13,879.93.
    Exporters came under early selling pressure after the dollar
 dropped as low as 100.585 yen in early Asia, its
lowest level since May 10. 
    Honda Motor Co dropped 2.1 percent, Sony Corp
 fell 1.7 percent and Komatsu Ltd shed 1.1
percent.
    The Topix dropped 1.5 percent to 1,162.19.
    Analysts said the rising yen further dented already
depressed sentiment after U.S. stocks weakened overnight on
ongoing fears that the Federal Reserve might soon begin scaling
back its massive stimulus programme.
    Investors have remained on edge since last Thursday when the
Nikkei plunged 7.3 percent, its worst single-day loss since the
March 2011 earthquake and tsunami. The subsequent days have also
seen some extreme volatility, with a rebound in the yen, the Fed
stimulus worries and a slowdown in China making investors
uneasy.  
    "The rising yen is just a minor reason that triggered
further selling. The fundamental concern that's been in
investors' heads is the possibility that the Fed is exiting from
quantitative easing," said a fund manager at a U.S. hedge fund.
    Analysts expect volatility in Japanese equities to persist
over the next few weeks, with U.S. economic data closely watched
for clues on how they could affect the Fed's exit strategy and
foreign exchange markets.
    "People are worried that a winding down of quantitative
easing could end the generous supply of money, leading to a
surge in interest rates and a downturn in stock prices and
economies," Ryoji Musha, president of Musha Research wrote in a
report.
    The Nikkei is up 14 percent since April 4, when the Bank of
Japan announced a sweeping monetary expansion campaign to
eradicate years of deflation and revive growth. The aggressive
stimulus pursued by the central bank and government has driven
the index up 35 percent so far this year.

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