CORRECTED-GLOBAL MARKETS-Yen plunges vs dollar, euro; Wall St steps back

Mon Feb 11, 2013 5:48pm EST

(CORRECTS headline to show yen fell against dollar, euro (not
yen)
    * Dollar, euro leap vs yen on Brainard comments
    * Wall Street wans as it consolidates after recent highs
    * Euro currency war talk continues
    * U.S. crude jumps, though brent falters

    By Leah Schnurr
    NEW YORK, Feb 11 (Reuters) - The yen slid sharply against
the dollar and the euro on Monday after a U.S. Treasury official
voiced support for Japan's efforts to boost growth and end
deflation.
    Wall Street and world equity markets were little changed in
light volume as a lack of major economic news gave investors
little reason to push stocks higher, for now.
    The euro had already climbed as a European policymaker
dismissed talk of intervening to weaken the currency, while U.S.
stocks were unable to get further traction after hitting
multi-year highs.
    The dollar rose as high as 94.42 yen on Reuters data,
the highest since early May, 2010, and was last up 1.8 percent
at 94.33 yen.
    The euro rose 2.1 percent to 126.46 yen, after
reaching as high as 126.59 yen.     
    The yen plunged after U.S. Treasury  Undersecretary Lael
Brainard said the United States supports Japanese efforts to end
deflation and re-invigorate growth. The markets viewed her
comments as a green light to sell the yen further, analysts
said.
    "This suggests that the U.S. government has no problems with
yen weakness and won't support any official criticism of Japan's
exchange rate policies at the G20 meeting," said Kathy Lien,
managing director at BK Asset Management in New York.  
    Tensions over whether some countries are deliberately trying
to weaken their currencies were in focus, with French Finance
Minister Pierre Moscovici saying euro zone countries need closer
cooperation on exchange rate policy.  
    But that was offset by comments from European Central Bank
policymaker Jens Weidmann, who said that discussions about an
overvaluation of the euro are simply a diversion from
governments' task of sorting out their economies. He said the
euro was not over-valued. 
    After three days of declines against the dollar, the euro
was lifted by investors looking to buy at low levels, and the
currency accelerated its gains after Weidmann's remarks. 
    "Given the fragility of the markets lately, that was all it
took to bring the single currency above $1.3400 and test the
$1.3430 resistance area," said Matthew Lifson, senior analyst
and trader at Cambridge Mercantile Group in Princeton, New
Jersey.
    The euro was up 0.3 percent at $1.3406 as speculators bought
into the earlier dip to near three-week lows.
    European Central Bank President Mario Draghi suggested last
week that further euro strength could lead to an interest rate
cut. French President Francois Hollande has also urged the euro
zone to set an exchange rate target.
    The Group of Seven major industrial nations may be about to
add its weight to the debate in an effort to cool the rhetoric.
Two G20 officials told Reuters the group was considering making
a statement this week reaffirming a commitment to
"market-determined" exchange rates. 
    G20 finance ministers and central bankers meet in Moscow on
Friday and Saturday.
    "The G20 meeting in Moscow this week seems certain to focus
on 'currency wars' but beyond a bland call for countries not to
engage in competitive devaluations, it's hard to see what
concrete steps can be taken at this stage," said Kit Juckes, FX
strategist at Societe Generale in London.
    The fear of competitive devaluations by major economies has
been building since new Japanese Prime Minister Shinzo Abe began
putting pressure on the country's central bank to take
aggressive easing measures to revive the nation's economy.
    
 

    STOCKS PAUSE    
    Stock and other  markets showed little reaction to a speech
from Federal Reserve Vice Chairman Janet Yellen. Seen as a
potential successor to Fed Chairman Ben Bernanke next year,
Yellen said the central bank's aggressive and ongoing easing of
monetary policy is warranted given the state of the labor
market. 
    Investors will get some insight into President Barack
Obama's plan for spurring the economy in his State of the Union
address on Tuesday. 
    Encouraging U.S. and Chinese data last week helped push U.S.
equities higher, sending the tech-focused Nasdaq to a 12-year
closing high and the S&P 500 to a five-year peak. 
    Less than two months into the year, the S&P 500 is up more
than 6 percent, but the rally has stalled with the S&P and Dow
industrial indexes near record highs.
    "This is still a market that looks terrific, but when you're
up for six weeks in a row, everyone is going to want to take a
pause going into the seventh week even if there is no bad news
out there," said Eric Kuby, chief investment officer at North
Star Investment Management in Chicago.
    "Everyone wants to buy on a dip in this market, but if
you're on the sidelines right now, the decline we're seeing
today just isn't the kind you would jump in on," Kuby said.
    The Dow Jones industrial average closed down 21.73
points, or 0.16 percent, at 13,971.24. The Standard & Poor's 500
Index edged down 0.92 points, or 0.06 percent, at
1,517.01. The Nasdaq Composite Index was off 1.87
points, or 0.06 percent, to 3,192.00. 
    The benchmark 10-year U.S. Treasury note was off
4/32 to yield 1.964 percent. 
    MSCI's world equity index was down 0.3
percent, and the pan-European FTSEurofirst 300 index 
ended down 0.7 percent.
    Brent crude prices fell as gasoline futures fell and as
investors worried about the health of the euro zone economy.
    Brent slipped 77 cents to $118.13 a barrel. U.S.
crude futures settled up $1.31 to $97.03, narrowing the
spread between higher priced Brent futures and their U.S.
counterpart after it widened last week.

 (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
Dan Grebler)
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