Yen extends gains in Asian trade

The yen strengthened against the dollar and euro in afternoon Asian trade Thursday, extending a rally after the Japanese unit declined sharply for weeks on speculation of more central bank easing.

The dollar slipped to 88.25 yen from 88.37 yen in New York Wednesday afternoon while the euro bought 117.20 yen from 117.42 yen in US trade ahead of a Bank of Japan policy meeting next week.

The 17-nation euro inched down to $1.3281 on Thursday, against $1.3286.

Earlier in the session, the yen slipped against the pair but it then changed course in part driven by the direction of Tokyo's Nikkei 225 stock index.

The bourse slumped 1.28 percent in early afternoon trade after ending the morning session in positive territory.

"Amid strong correlation between the Nikkei Index and the yen, people are buying back the yen as the Nikkei extends its losses," Marito Ueda, senior managing director at FX Prime Corp., told Dow Jones Newswires.

A strong yen generally weighs on Tokyo's equity market as it makes the nation's exporters less competitive overseas while a weakening yen tends to lift manufacturers' shares.

The dollar had almost touched the 90-yen level on Monday, a day before Japan's economy minister Akira Amari warned that the yen's fast decline could hurt consumers by making imports more expensive as the world's third-largest economy struggles to cement a recovery.

His comments sent the yen soaring against the dollar and euro following weeks of steep declines on speculation about the Bank of Japan launching fresh easing measures.

The central bank has been under growing pressure from the country's new government for aggressive policy moves to boost the economy.

Weighing on the euro was a report this week quoting Jean-Claude Juncker, head of the eurozone finance ministers' group and Luxembourg's prime minister, as saying the euro was "dangerously" overvalued.

But the warning may have been tempered slightly by the International Monetary Fund Wednesday unblocking 3.2 billion euros ($4.3 billion) in aid for debt-strangled Greece, part of its long-delayed rescue package for Athens.

Helping the dollar was the US Federal Reserve's Beige Book survey on Wednesday which showed the world's biggest economy has picked up pace since November.