WORLD FOREX: Strong Japan Output Data Lift Yen Vs Dlr, Euro

Data from Japan's trade ministry showing that industrial production rose 5.2% on month in April - the biggest gain since March 1953 - led Asian hedge funds and other short-term investors to buy the yen, dealers said.

The data added to hopes that Japan's export-reliant economy has left behind the worst of its recession, although other data issued in the day indicated that its domestic demand is deteriorating.

The dollar fell briefly to Y96.25, down more than two-thirds of a yen from late New York Thursday, before recovering to around Y96.50.

The euro also slid to Y134.47 from Y135.19 overnight on selling by some Japanese institutional investors, dealers said. The European currency later pared some gains on short-covering by speculators, they said.

But the outlook for the yen looks unclear because the currency markets still lack any clear sense of direction, said Motonari Ogawa, a director at Barclays Bank in Tokyo. Currency traders' focus is changing around so often, so quickly - from stock markets to U.S. yields to economic data - that it's too risky to make long-term directional bets, he said.

"The base range for dollar/yen is from Y95 to Y98," he said. Many players are trading based on technical charts, so "if the dollar breaks below or above that range, they'll follow in the same direction," he said. link....