World stock markets rallied as the US and Japanese central banks came to the yen's rescue yesterday, driving the embattled currency sharply higher. Their joint invention, which took the foreign exchange markets by surprise, relieved fears that further Japanese currency weakness would trigger a round of devaluations in Asia, notably in China and Hong Kong. "It gives a temporary reprieve to the whole Asian region," said Mr Jim Power, economist at Bank of Ireland Group Treasury.
Wall Street surged by more than 200 points on the news and eventually closed up 164.17 points on 8829.46, helping European bourses to extend a rally which was initially triggered by a recovery in Asian share markets.
But the Irish market failed to participate in the global rally, ending unchanged after a day characterised by lacklustre and illiquid trade. Dealers said, however, that Irish stocks tended to lag overseas markets and activity should pick up today as the Dublin market catches up with Europe.
The joint US-Japan currency intervention signalled a clear shift in US policy and was taken to stop a 37-month yen slide which had threatened to trigger another round of damaging currency devaluations in Asia, leading to a recession which could turn global.
Asian markets staged strong rallies on foot of the move, clawing back ground lost earlier in the week. South Korea had the strongest percentage gain with the composite index rising above the 300 level to end 8.5 per cent higher. But shares in Singapore, Thailand, Malaysia and Indonesia also posted strong gains.
In Europe, the Frankfurt and Paris markets rebounded by around 2 per cent while the international blue-chip stocks in the FTSE 100 index were carried higher by this wave of enthusiasm, finishing 103 points higher at 5,832.7.
But analysts warned the intervention euphoria could prove short-lived as the yen could resume its nosedive if Japan's attempts to stimulate its economy were not convincing.
