* Brainard remarks give impetus to yen, Tokyo stocks
* Yen hovers near lowest since May 2010 vs dollar
* MSCI Asia ex-Japan eases amid subdued activity
* Many Asian markets remain shut for holiday
* European shares seen inching lower
By Chikako Mogi
TOKYO, Feb 12 The yen hovered near its lows
against the dollar and Tokyo stocks jumped closer to a 33-month
high on Tuesday after markets took comments from a U.S. official
as approval for Japan to pursue anti-deflation policies that
weaken the yen.
U.S. Treasury Undersecretary Lael Brainard said on Monday
the United States supports Japanese efforts to end deflation,
but she noted that the G7 has long been committed to exchange
rates determined by market forces, "except in rare circumstances
where excess volatility or disorderly movements might warrant
"Her (Brainard's) comments gave confidence to the market. It
was surprising, and was taken as the Obama administration giving
a green light to 'Abenomics'," said Takuya Takahashi, a market
analyst at Daiwa Securities.
Japan has faced some overseas criticism that it is
intentionally trying to weaken the yen with monetary easing, but
talk of a so-called currency war was dialled back ahead of a
Group of 20 meeting in Moscow on Friday and Saturday.
G20 officials said on Monday the Group of Seven nations are
considering a statement this week reaffirming their commitment
to "market-determined" exchange rates.
European Central Bank council member Jens Weidmann also said
the euro was not overvalued at current levels.
The dollar slipped 0.3 percent to 94.185 yen after
marking its highest level since May 2010 of 94.465 on Monday.
The euro eased 0.3 percent to 126.12 yen after rising
more than 2 percent on Monday. It hit its highest since April
2010 of 127.71 yen last week.
"I think the yen's weakening is a function of
(playing)catch-up," and not Japan resorting to deliberate
devaluation of its currency, said Andrew Wilkinson, chief
economic strategist at Miller Tabak & Co. in New York. "It's the
market's way of saying: 'We're convinced there is a movement
afoot to reinflate Japan.'"
The yen is pressured by anticipation that Prime Minister
Shinzo Abe will endorse a far more dovish Bank of Japan regime
when the current leadership's term ends next month, although
the BOJ is expected to refrain from taking fresh easing steps
when it meets this week.
Share trading was subdued with many regional bourses shut
for holidays. Encouraging trade data from China late last week
was lending support to sentiment but non-Japan markets lacked
momentum as investors awaited key events such as the U.S.
president's State of the Union address for trading cues.
European markets are seen inching lower, with the Euro STOXX
50 index futures down 0.1 percent. A 0.2 percent drop
in U.S. stock futures also suggested a soft Wall Street
The MSCI's broadest index of Asia-Pacific shares outside
Japan fell 0.1 percent, with Australian shares
closing flat ahead of corporate earnings due this week.
The weaker yen in turn hoisted the Nikkei stock average
to close 1.9 percent higher on improving earnings
prospects for exporters.
Trading resumed in Japan and South Korea but markets in
Singapore, Hong Kong, mainland China, Malaysia and Taiwan
STATE OF UNION ADDRESS
Currency and equities markets were also looking ahead to
President Barack Obama's State of the Union address later on
Tuesday night, for any signs of a deal to avert automatic
spending cuts due to take effect March 1.
"We believe that the G20's take on currency wars, Mr.
Obama's upcoming state of the union address, and data on the
current condition of the U.S. economy should help markets assess
where the global recovery stands and where we are heading,"
Barclays Capital said in a research report.
U.S. and Chinese data last week lifted the tech-focused
Nasdaq Composite Index to a 12-year closing high and the
Standard & Poor's 500 Index to a five-year peak on
Financial markets showed a muted reaction to the news that
North Korea has conducted a nuclear test.
"The test was not something that makes your heart pound as
much as a pressing situation between Iran and Israel," said
Kaname Gokon, research manager at brokerage Okato Shoji,
referring to the threat of possible military action to prevent
Iran from developing nuclear weapons.
U.S. crude futures edged down 0.1 percent to $96.90 a
barrel while Brent steadied around $118.
Spot gold stayed near a one-month low.