TOKYO/NEW YORK A coordinated move by central banks of rich nations to stabilize the yen appeared to be working on Friday, tamping its value down after Japan's devastating earthquake and nuclear crisis triggered a yen surge and raised fears about the global economy.
The action by the Group of Seven, in which they poured billions of dollars into markets, was the first joint intervention in currency markets since the G7 came to the aid of the newly launched euro in 2000.
The U.S. dollar surged two full yen to as much as 81.98 yen in response, up from a record low of 76.25 hit on Thursday. It dropped back to under 81 yen in early afternoon trade but remained above what some analysts suggested was a psychologically important level of 80 that could heighten chances of more intervention.
The G7 move reflected concern that a soaring yen could curb Japan's exports and throw the world's third largest economy back into recession, slowing global growth and sapping market confidence.
The yen's surge in the wake of the earthquake and tsunami may have seemed counter-intuitive at first glance, but it reflected, in part, market speculation that Japanese firms and the Japanese government will repatriate money now invested overseas in order to pay insurance claims and the cost of rebuilding.
Traders on Friday estimated the Bank of Japan alone bought more than $25 billion, paying with yen to effectively weaken the currency's value by boosting the supply.
Every member of the G7 was involved in Friday's market intervention, a massive show of unity designed to brush back speculators who might have been more willing to question the resolve of Japan if it had attempted the effort alone.