Nikkei set to rise, heads for longest winning run since May 23

TOKYO (REUTERS) - Japan's Nikkei is expected to open higher on Tuesday and head for a third straight day of gains, which will mark its longest winning run since a sharp sell-off on May 23, underpinned by hopes the United States (US) Federal Reserve will reinforce its commitment to support the US economy.

The Nikkei is likely to trade between 12,900 and 13,200, strategists said, after climbing 2.7 per cent to 13,033.12 on Monday, lifting the benchmark out of bear market territory, though trading volume was light.

Nikkei futures in Chicago 0#NIY: closed at 12,955 on Monday, down 0.8 per cent from the Osaka close of 13,060.

"The G8 summit welcomed Prime Minister Shinzo Abe's explanation on his policy, although there has been concerns that some countries may finger-point him as trying to cheapen the yen," said Mr Eiji Kinouchi, chief technical analyst at Daiwa Securities.

"There were cases in the past where the yen strengthened after a G20 meeting but that didn't happen. So it's good for stocks."

The yen was last traded at 94.685 yen to the dollar on Tuesday, down from the previous session's high of 94.08.

The G8 called on Europe on Monday to press on with a banking union and Japan was urged to follow up on massive central bank stimulus with structural reforms and measures to tackle its budget deficit.

The yen has exhibited a close inverse relationship with equities, especially Japanese shares which suffered a sharp selloff in recent weeks, prompting an unwinding of short-yen positions.

Investors, mainly hedge funds, have been cutting their long Japanese equities and short yen positions on concerns that the Fed will scale back its stimulus and after the Nikkei had rallied more than 80 per cent from mid-November to its 5-1/2 year peak hit on May 23.

Since then, trading in Japanese equities has been extremely volatile.

The US dollar climbed against the yen for the first time in five sessions on Monday, as stock markets rallied on expectations the Fed's policy announcement this week will reassure investors that monetary stimulus will remain in place.

On Monday, the broader Topix index climbed 2.7 per cent to 1,084.72.

The benchmark Nikkei has fallen 18 percent since that mulityear high on May 23, but is still up 5 per cent since April 4, when the Bank of Japan unveiled sweeping stimulus measures and has risen 25 per cent this year.

Wall St rises in volatile session before Fed meeting US dollar gains v yen on stock bounce, Fed meeting Treasuries fall on jitters over Fed bond buying Gold slips as US equities rise, FOMC in focus Brent crude oil dips before Fed meeting


The automaker aims to sell some 1.5 million vehicles in Japan this year, about 50,000 more than previously planned, the Nikkei newspaper said.

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