TOKYO: The Nikkei share average is expected to scale yet another five-year high on Friday as the U.S. dollar finally managed to break above the elusive 100 yen mark, putting the Japanese currency at levels that should generate robust earnings for many exporters.
Market players said the Nikkei was likely to trade between 14,350 to 14,550 on Friday after dropping 0.7 percent to close at 14,191.48 on Thursday.
If the index trades above its resistance line of 14,500, a level that some analysts expect will be reached by next month, it would mark the first such move since early June 2008.
Nikkei futures in Chicago closed at 14,545, up 2.2 percent from the close in Osaka of 14,230.
The U.S. dollar broke through 100 yen on Thursday, its highest level against the currency in over four years, helped by data showing U.S. claims for unemployment benefits fell to the lowest level since January 2008.
The dollar last traded at 100.70 yen.
"Many investors have waited for this moment when the yen drops to 100 against the dollar. It raises hopes that exporters will revise up their earnings for the business year," said Yutaka Miura, senior technical analyst at Mizuho Securities.
With the earnings season in full swing and companies reporting strong results for the year ended March 2013, many of the blue chip companies have surprised investors with overly conservative forecasts for the current fiscal year. The likes of Toyota Motor Corp (7203.T) and Sony Corp (6758.T) based their foreign exchange assumptions at 90 yen to the dollar.
However, traders were optimistic about the outlook for corporate Japan.
"Conservative forecasts did not lead to pessimism in the market. They rather made us think, 'oh, they can generate such profits even at 90 yen, then their actual profits will be way better at the end of the day,'" said Takuya Takahashi, an analyst at Daiwa Securities.
Mizuho Securities' Miura believes some investors may book profits before the closing bell as they tend to shed large positions before the weekend.
"Also, strong buying in the Japanese market was partly supported by Wall Street's strength over the past few days. U.S. stocks fell overnight, so some investors may want to unwind their positions," Miura added.
> S&P 500 slips, snaps five-day streak of record closes .N > US dollar vaults 100 yen mark to 4-year high
STOCKS TO WATCH
--Sony Corp (6758.T)
Sony said it expects operating profit to hold steady in the year to March 2014 after profits rose to its highest in five years last year, with overseas sales bolstered by a weakening yen.
--Suzuki Motor Corp (7269.T)
Suzuki, Japan's No.4 automaker, booked a record 80.4 billion yen ($813.60 million) in net profit for the year ended March, up 49.2 percent year-on-year, helped by record vehicle sales. - Reuters