Exchange traded funds (ETFs) recorded a second day of robust gains Friday as investors tried to measure the risks from violence in Libya and Japan’s ongoing crisis heading into the weekend.

  • The Japanese yen fell against the U.S. dollar on Friday by the most since September after the Group of Seven nations agreed to take steps to curb the Japanese currency’s post-earthquake surge — the first coordinated intervention by the world’s financial powers since 2000. It’s the biggest drop for the yen since September 15, when Japan intervened in currency markets by itself. The dollar is still down about 2.5% since the earthquake hit Japan, but Friday’s trading erased the dollar’s gains for the year. “It looks as though global authorities are willing to pull out all of the stops to defend the 80.00 level in dollar/yen,” said Kathleen Brooks, research director at The ProShares UltraShort Yen ETF (NYSEArca: YCS) ended Friday almost 4.5% higher.
  • Bank shareholders got a long-awaited gift from the U.S. Federal Reserve on Friday when the central bank cleared the way for major lenders to increase their dividends. It was the last hurdle left on the path to recovery for banks and signified a return to health for the industry. Banks were forced to cut their dividends to preserve cash after the financial crisis that peaked in September 2008, when the industry was propped up by a U.S. government bailout package totaling $700 billion. “This is the last act in the recovery from the financial crash,” said Nancy Bush, financial analyst and contributing editor at SNL Financial. “But banks are still not free of close regulatory scrutiny and managements and boards still can’t act freely to raise future dividends.” The SPDR KBW Bank ETF (NYSEArca: KBE) gained approx. 1% today.
  • Unemployment rose in nearly all of the 372 largest U.S. cities in January compared to the previous month, mostly because of seasonal changes such as the layoff of temporary retail employees hired for the holidays. The Labor Department said Friday that the unemployment rate rose in 351 metro areas, fell in only 16, and was unchanged in 5. That’s worse than December, when the rate fell in 207 areas and increased in 122. The report shows that metro areas hit hard by the housing crisis are still struggling with high unemployment. At the same time, a strong recovery in the manufacturing sector, particularly among U.S. auto companies, has bolstered many smaller cities in the Midwest. The PowerShares Global Steel ETF (NasdaqGM: PSTL) jumped almost 4.5% on Friday.
  • Western powers moved closer to military action in Libya on Friday after the United Nations authorized “all necessary measures” to protect civilians there. France, the U.K. and the U.S. said they were taking steps to carry out the resolution, which is aimed at protecting rebels in Libya who are fighting to overthrow the government of Moammar Gadhafi. The steps followed weeks of indecision and inaction by the international community, while forces seeking Gadhafi’s ouster battled his army and air forces. The fighting in Libya is the bloodiest of the unrest that has swept Arab countries in the Middle East and North Africa as populations’ rebel against repression, lack of opportunity and poverty. The SPDR S&P Oil & Gas Exploration ETF (NYSEArca: XOP) ended the day flat.

Gregory A. Clay contributed to this article

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