LONDON, May 23: The yen fell sharply against the dollar here on Thursday after the Bank of Japan flexed its muscle again on currency markets, intervening for the second day running to curb the recent rise of the Japanese currency.

The yen fell to 124.95 per dollar from 124.25 earlier in Tokyo trading, after the Japanese central bank stepped into the currency markets to haul the yen further away from recent five-and-a-half-month high points.

Japan’s central bank sold an estimated one billon dollars’ worth of yen, said Jiji Press news agency, quoting market sources.

On Wednesday Japan intervened in the market for the first time for eight months to sell the yen after it rose as high as 123.50 against the dollar.

The Japanese authorities are concerned that the recent rise of the yen, largely the result of dollar weakness against all leading currencies, will stiffle the recovery of the recession-ridden Japanese economy.

Japanese central bank governor Masaru Hayami had warned earlier on Thursday: If the yen weakens, it will contribute to the economy and help exports grow but it is not so easy to realise that because the foreign exchange market is too big.

Recent dollar-yen moves were too rapid. On that point, it was good for authorities to step in to stabilise the market. The intervention was made to curb wild fluctuations.

Economists said that the Japanese central bank would probably succeed in halting the rise of the yen, but they said it would have its work cut out.

The compounding issue at the moment is that we’re seeing broad-based dollar declines, said Commerzbank economist Kamal Sharma.

This is not a dollar/yen specific move... So they may have to fight that much harder than in previous years to take the dollar higher, he told AFP.

While the yen fell against the dollar, the euro edged up against the US currency after signs of recovery in euro-zone economic data, notable figures showing that the German economy had emerged from a shallow recession late last year to notch up modest growth of 0.2 per cent in the first quarter of 2002.

Separate figures showed that French household spending on manufactured goods had risen by 0.8 per cent in April from March. Consumer purchases of manufactured goods rose 4.2 per cent over the 12-month period, seasonally adjusted figures showed.

We have had a very nice performance in the euro/dollar over the past few days, some of it has been ongoing dollar weakness, said Citigroup economist Steven Saywell.

We had a slight moderation in inflation, slightly stronger growth and less inflation concerns from the ECB (European Central Bank). That combination certainly helps the euro — it removes some barriers for appreciation.

The euro traded for $0.9260 against 0.9249 late on Wednesday, 115.31 yen (114.94), 0.6339 pounds (0.6339) and 1.4534 Swiss francs (1.4527).

The dollar was worth 124.95 yen (124.18), and 1.5702 Swiss francs (1.5770).

The pound was at 1.4606 dollars (1.4582), 182.08 yen (181.16) and 2.2945 Swiss francs (2.2891).

The price of gold on the London bullion market rose to $317.65 an ounce from $317.10 late on Wednesday.—AFP