* Dollar, euro buoyed by surge for Nikkei
* Japan finmin upbeat on economy, offers hint of pension
* Euro ticks up against dollar ahead of final inflation
* UK labour report expected to be positive for sterling
(New throughout, changes dateline from TOKYO)
By Patrick Graham
LONDON, April 16 The yen fell against the dollar
and the euro on Wednesday, hit by comments by Japan's finance
minister that traders took as a sign of future buying by its
giant state pension fund of Tokyo stocks.
The inverse relationship between the Nikkei share index and
the yen is one of the foreign exchange market's long established
trends. Foreign players traditionally sell the yen to hedge
purchases of Japanese shares while a stronger Nikkei typically
makes Japanese investors more comfortable with investing abroad,
also a negative for the currency.
The share index surged to a 3 percent daily gain on
Wednesday on the back of Finance Minister Taro Aso's promise
that "moves" by the $1.26-trillion government pension fund would
become apparent from June.
That came amid rhetoric from Japanese officials read as
generally cooling the prospect of more monetary easing in Prime
Minister Shinzo Abe's push to drive up inflation and get Japan
"Some of the recommendations for the pension fund are going
to be implemented shortly and that story would explain the move
overnight," said Ian Stannard, head of European currency
strategy with Morgan Stanley in London.
"But overall the risk is that we do get another setback (for
the dollar) in the short-term. They're playing down the need for
more policy action and that's going to leave the market quite
disappointed and the yen well supported."
The yen weakened to 102.20 yen per dollar and 141.46 per
euro, down 0.3 and 0.4 percent respectively.
The day's first focus in European time will be British
labour market data, expected to show the first real rise in
wages since the 2008 financial crisis after another fall in
annual inflation on Tuesday.
A number of analysts say that will provide a boost for
sterling, which has stalled after gaining more than 10 percent
over the past 12 months on growing expectations of a rise in
interest rates next year.
"The profile for inflation is going to be fairly weak and we
think that will take the steam out of the rates debate,"
"But wage rises are just the sort of pick-up that the
economy and sterling needs. There is still some upside here
against the dollar though I would look more to play the crosses
against other currencies."
The pound ticked up 0.2 percent to $1.6758.
The euro showed further signs of resilience to the more
explicit opposition shown recently by European Central Bank
officials to further gains, rising 0.2 percent against the
At 1.3839, it remained below levels seen before ECB
President Mario Draghi's verbal intervention on the currency at
the weekend, but just a cent off 2014 highs in a market already
thinning out ahead of the Easter break.
"Quiet markets could see the euro drift up to 1.3850 and we
imagine there are plenty of stops on short EUR positions near
1.3880," said Chris Turner, a strategist with Dutch bank ING in
"The focus (for the dollar) today will be on whether U.S.
housing starts and building permits can rebound back to their
highs, industrial production and also on Fed speakers."
Fed Chair Janet Yellen was due to speak on monetary policy
and the economic recovery before the Economic Club of New York
later on Wednesday.
(Editing by Sonya Hepinstall)