Yen climbs up in Tokyo

The yen rose broadly on Wednesday as worries about the US subprime mortgage sector and a warning against one-way bets by Japan's finance minister in the previous session crimped investor appetite for yen carry trades.
Weak stock markets, due partly to concerns about the exposure of US lenders to subprime mortgages, have reduced investor interest in risky assets around the world. The Nikkei share average fell 1.2 percent.
Market players were also on edge after Japanese Finance Minister Koji Omi warned the previous session that markets should be aware of the risks of one-way bets, an apparent reference to carry trades funded in the low-yielding yen.
"The issue of US subprime mortgages is flaring up again. It's not an atmosphere where people can aggressively take positions in risky assets," said a trader for a Japanese bank.
The dollar slid 0.4 percent from late US trade to 122.80 yen pulling away from a 4-1/2-year high of 124.14 yen hit on electronic trading platform EBS on Friday. The US currency drew some support thanks to buying by Japanese retail investors, such as those trading with margin accounts, traders said.
The euro fell 0.4 percent to 165.03 yen, off an all-time high of 166.94 yen hit last week. The single European currency's losses against the yen dragged it down to $1.3439 from around $1.3455 in late New York. The high-yielding Australian dollar came under the most pressure against the yen, dropping nearly 1 percent to 103.35 yen.
The popularity of carry trades - borrowing funds in low-yielding currencies such as the yen to buy higher-yielding assets - has been one of the driving factors in the yen's broad slide that pushed it to a 20-year low against the New Zealand dollar and a 15-year trough against the pound late last week.
Gerrard Katz, head of North Asia FX trading at Standard Chartered, said that so far there have been isolated corrections against the yen and noted that both the pound and kiwi were holding up.
The struggles of two hedge funds managed by Bear Stearns have refocused attention on defaults in US subprime mortgages, and on whether such problems will have an adverse impact on the broader US economy and financial markets.
Such jitters have prompted investors to unwind some carry trades by buying back the low-yielding yen against higher- yielding currencies, said a trader for a major Japanese bank, adding that such position unwinding was still relatively mild.
Tuesday's comments by Omi echoed remarks by officials at Group of Seven meetings in the past year referring to carry trades, suggesting some concern about the pace of the yen's slide.
But traders said Japan's Ministry of Finance was unlikely to conduct any yen-buying intervention, and that unless it did so further warnings from Japanese authorities would eventually lose their effectiveness.
The yen's advance was likely to be tempered by demand for dollars and other foreign currencies from Japanese retail investors seeking higher yields abroad, with a slew of foreign asset mutual funds set to be launched this week.