TOKYO: The yen held firm against the dollar on Friday as investor sentiment brightened on a rally in Asian shares hours before the start of a sharply anticipated meeting of major economy finance chiefs.
Investors are looking for signs policymakers plan to unleash more government or monetary stimulus to boost a wobbly global economy, hit by a slowdown in China and plunging oil prices, at the two-day Group of 20 gathering in Shanghai later Friday.
"Markets are rallying ahead of the G20 meeting, boosting risk assets," Mansoor Mohi-uddin, a senior markets strategist in Singapore at Royal Bank of Scotland Group, told Bloomberg News.
"The risk is that investor sentiment is disappointed by the meeting's outcome, leading to renewed strength of the yen."
The dollar ticked down to 112.90 from 112.95 yen overnight in New York, but was up from 112.27 yen in Tokyo on Thursday. The euro advanced to $1.1063 and 124.86 yen from $1.1023 and 124.51 yen in US trade.
The Japanese unit has surged this year as traders scooped up a currency widely seen as a safe bet in times of turmoil.
In Japan, news that inflation fell to zero in January raised concerns about the world's number three economy as it tries to shake off years of falling prices and lift growth.
The news -- a fresh blow for Prime Minister Shinzo Abe after three years of trying to kick-start growth with a raft of policies that include government spending and an unprecedented central bank bond-buying programme -- spurred talk of more action by the Bank of Japan.
The Japanese central bank is slated to hold its next meeting in March.
"An increase in the BoJ's asset purchases programme seems to be what the market is demanding," Angus Nicholson, a market analyst at IG in Melbourne, wrote in a client note.
Nicholson added that investors are also cautious that any further BoJ moves could jeopardise the yen's status as a safe haven.
Either way, Nicholson concluded: "Lots of yen volatility to come this year."
In other trading, the brighter mood pushed up higher yielding emerging currencies against the greenback.
The oil-linked Malaysian ringgit and South Korea's won gained 0.24 percent against the US currency, while the Indonesian rupiah jumped 0.22 percent.
The Singapore and Taiwan dollars and Philippine peso also booked healthy gains.
Markets were also buoyed by hopes of stimulus measures from the G20 meeting as the gloomy outlook for the global economy has added to pressure on both governments and central bankers to unleash fiscal and monetary firepower to help stimulate growth.
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