The Japanese yen experienced a day of volatile trading yesterday, rising by almost two yen to the US dollar at one stage in Tokyo trade before collapsing by four yen as European and United States markets opened.
Early moves by hedge funds, which have been badly burned by the Russian crisis, resulted in a large unwinding of yen short positions as investors sought to book profits, traders said.
Suffering from the sharp drop in the Dow Jones Industrial Average on Thursday, the dollar started the session on a weak note.
Some traders noted a large amount of Japanese repatriation of foreign investments.
The latest developments affecting the yen came as the influential Vice-Minister of Finance for International Affairs Eisuke Sakakibara also said he 'would not be surprised' if the yen rose higher than 140 yen.
He said that the yen would probably strengthen further on profit-taking in the dollar and the deutschemark to make up for losses in emerging markets.
Mr Sakakibara's comments yesterday helped boost the yen to a high of 140.2 yen, up sharply from the New York close of 141.85 yen on Thursday.
