The US dollar held at five-week highs against the yen yesterday amid economic and political turmoil in Southeast Asia and pessimism over the outlook for Japan's economy. Rioting in Indonesia, concerns the yuan may be devalued and increasing confidence the Bank of Japan will not intervene to support the yen dominated talk in foreign exchange dealing rooms. Deutsche Morgan Grenfell international economist Michael Lewis said: 'We seem to be in danger of slipping into a second round of currency weakness across the region.' The dollar opened higher in New York at 134.23 yen, up from 133.8 at Tuesday's close. Analysts said the successful break through of 133.4 yen on Monday had breached an important technical barrier as it was this level that the Bank of Japan had triggered a massive intervention, and bulls were now targeting the dollar to rise to 140 yen in the near term. 'The environment surrounding the yen is getting worse and worse,' said Tetsu Aikawa, a manager for foreign exchange at Sanwa Bank. 'If Japanese stocks continue to fall and bond yields keep dropping, the dollar will head to 135 yen soon.' In Japan, the benchmark bond yield hit a new low for the eighth time in nine days and stocks edged up, triggering renewed yen selling by Japanese investors seeking higher returns abroad. The Nikkei-225 Index ended 0.14 per cent higher at 15,343.81 points, after falling as much as 1 per cent earlier. The yield on the benchmark 10-year government bond touched a record low of 1.29 per cent on expectations the economy will remain in the doldrums. In an effort to revive the economy, the government released a 16.65 trillion yen (about HK$963.15 billion) stimulus plan last month. While ruling party officials have repeated for several weeks that the package could boost growth by at least two percentage points this year, many investors doubt it will turn the economy around anytime soon. The Organisation for Economic Development said Japan's economy would probably shrink 0.3 per cent this year. Rioting in Indonesia also hurt the yen, traders said. The Indonesian rupiah fell for a third day and settled at 10,300 to the dollar and stocks dived 6.61 per cent after soldiers killed six student protesters on Tuesday. Falling regional stock and currency markets yesterday put more pressure on the yen because Japan is the biggest investor and creditor in the region. Sadaaki Tsunakawa, head of global foreign exchange at Citibank, said the dollar could top 140 yen in coming months.