* Yen slides to 101.66 against dollar
* Upbeat U.S. data, Japanese bond buys drive move
* German Bunds fall as safe-haven demand dented
* European shares hit five-year highs
By Richard Hubbard
LONDON, May 10 The yen made a decisive break
through 100 to the dollar to hit a 4-1/2 year low on Friday,
triggering a rise in safe-haven bond yields and supporting gains
in European and Japanese shares which hit new five-year highs.
U.S. Treasury 10-year note yield hit a one-month peak of
1.85 percent as the dollar gained on the yen, while
stock index futures signalled that Wall Street was set to resume
its recent record-breaking rise.
The falls in Japanese currency were sparked by a drop in
weekly U.S. jobless claims data on Thursday, which added to
evidence of a rapidly improving employment market first seen in
last week's nonfarm payrolls report.
The move was given a further push when Japan's Ministry of
Finance revealed on Friday that domestic investors had turned
net buyers of foreign bonds in the last two weeks.
This confirmed widespread expectations that the Bank of
Japan's aggressive stimulus plans would result in a massive
flight of money out of the country in a search for higher
"We've had back to back good news in U.S. figures and you
have to wind the clock back six to eight weeks to find the last
time we had that," said Nick Parsons, head of market strategy at
National Australia Bank.
"Once we got through a 100 (yen) and the Japanese bond
buying data came out, that added fuel to the fire," he said.
The yen hit a low of 101.66 to the dollar, its
weakest level since April 2009, and fell to a three-year trough
against the euro of 132.16 yen. Against a basket of
major currencies, the dollar hit a two-week high 82.68.
The yen's move came as finance ministers and central bankers
of the G7 countries gathered for a two-day meeting near London,
to discuss ways to stimulate growth, with currency movements
likely to be one of the main topics on the agenda.
Ahead of the meeting, U. S. Treasury Secretary Jack Lew said
Japan's attempts to stimulate its economy needed to stay within
the bounds of international foreign exchange agreements.
"So as long as they stay within those bounds of those
international agreements I think growth is an important
priority," Lew told the CNBC news channel in London.
The strength in the U.S. jobs market has raised hopes that
signs of a slowdown in other economic data will turn out to be
more of a soft patch rather than an end to the current recovery.
"I think the U.S. will be once again play a dominant role
(in the global economy) and that is the best investment," said
Neil Petroff, Chief Investment Officer of the Ontario Teachers
Pension Plan attending a conference in London.
"They are going to be self sufficient in oil, companies that
are reliant on energy for production are coming back from Asia
to the U.S. Then there is the housing market that has come back
and technology has always been innovative in Silicon Valley."
The U.S. Federal Reserve Chairman Ben Bernanke could even
leave the door open to further stimulus to boost the economy in
a 1330 GMT speech after conflicting comments on the programme's
effectiveness from some Fed officials.
The brightening economic outlook, amid efforts by all the
world's major central banks to stimulate activity, saw European
equities power on to fresh five year highs, drawing added
comfort from some solid corporate earnings reports.
The FTSEurofirst 300 index was up 0.6 percent at 1,236.69
points by midday with London's FTSE 100, Paris's CAC-40
and Frankfurt's DAX up as much as 0.9 percent.
Britain's main index was on course for its seventh straight
daily gain as recent data on the UK economy shows it recovery
gathered pace in the three months to April.
While German government bonds futures, usually sought when
investors are more fearful about the outlook, fell to a one
month low of 145.06, down 83 ticks.
As the yen fell, Japanese shares climbed to hit a 5-1/2 year
high with exporters and financials leading the charge on
prospects of enhanced corporate earnings. The benchmark Nikkei
share average closed up 2.9 percent to 14,607.54.
The index is up 6.4 percent for the week its biggest weekly
gain since December 2009 when it jumped 10.4 percent.
However, MSCI's broadest index of Asia-Pacific shares
outside Japan shed 0.9 percent, after climbing
to its highest since July 2011 on Thursday.
MSCI's world equity index, which tracks
stocks in 45 countries, was down 0.15 percent but is on course
to end its third week of gains at a five-year high.
Asian markets were being held back by persistent doubts over
the strength of the Chinese economy, which has also weighed on
commodity prices. In the first quarter, China's grew by a less
than forecast 7.7 percent, frustrating investors who had hoped
for a strong rebound of at least 8 percent
The doubts over demand from the world's second largest
economy and the dollar's strength saw Brent crude trade under
$104 a barrel on Friday, down 62 cents, while U.S. crude
eased 68 cents to $95.86 a barrel.