Japan's Nikkei average powered to a one-month closing high today, breaking both a chart retracement and key resistance level on a sense that the rise in China's yuan was a vote of confidence in the global economic recovery's staying power.
China's Saturday announcement that it would make the yuan more flexible suggested it was ready to break a 23-month-old peg to the dollar that had come under intense international criticism. Its central bank today kept the yuan's mid-point unchanged from Friday but the spot exchange rate strengthened to a 21-month high.
Buying was active and broad-based, with shares in Komatsuand rival Hitachi Construction Machinery jumping, while trading houses gained on higher metals prices and exporters rose on hopes the move will increase Chinese buying power.
The Nikkei climbed above a 38.2 per cent retracement around 10,155 of the fall from its April high of 11,408.17 to its June low of 9,378.23 and also broke above resistance at 10,200, a bit below the level of its 50-week moving average.
The benchmark Nikkei rose 2.4 per cent or 242.99 points to 10,238.01, extending rises that last week saw it post a 3 per cent gain on the week -- its biggest weekly gain in three months -- and marking its highest close since May 18th.
The broader Topix rose 2 per cent to 902.49.
The Nikkei now faces resistance around its 200-day moving average near 10,300 and then a 50 per cent retracement just under 10,400 of its April-June move.
Construction machinery makers Hitachi Construction and Komatsu both climbed as they would benefit from a stronger yuan as they assemble and sell their products in China after importing major parts from Japan.
Hitachi Construction, which has more exposure to China, surged 6.7 per cent to 1,873 yen, while Komatsu climbed 4.6 per cent to 1,782 yen.
Trading houses powered higher on surging base metals prices, with Shanghai copper jumping by its 5 per cent limit and other metals also rising sharply.
Mitsubishi climbed 6.6 per cent to 2,033 yen and Mitsui & Co gained 5.9 per cent to 1,210 yen.
Honda climbed 3.7 per cent to 2,790 yen, chip tester maker Advantest gained 5.1 per cent to 2,099 yen and Canon rose 2.8 per cent to 3,885 yen.
Shares of Teijin jumped 4.8 per cent to 282 yen after the Nikkei newspaper said it had developed a new carbon fibre material for automobiles that can be quickly shaped and processed, and could be used in the curved section of a car's body.
Volume was on the thin side with 1.8 billion shares traded, while advancing shares outnumbered declining ones by more than 10 to 1.
Reuters