* Nikkei likely to hit 9,000 if it goes below 9,500 -analyst
* Banks gain after Goldman Sachs ( GS - news - people ) upgrade on U.S. peers
By Aiko Hayashi
TOKYO, Oct 6 (Reuters) - Japan's Nikkei average dipped to hit its lowest point in 11 weeks on Tuesday as a stronger yen hurt some exporters such as Canon Inc ( CAJ - news - people ), though bank shares rose after Goldman Sachs upgraded the U.S. banking sector.
Market players said some investors moved to sell stocks after the Reserve Bank of Australia raised interest rates by 25 basis points to 3.25 percent, prompting concerns that other countries might follow suit.
Higher interest rates are often considered to be a negative factor for equities markets but some said that the hike could also be taken as a signal that Australia's economy is on the mend.
"The market is under pressure on the yen's advance against the dollar and after Australia's rate hike, which gave rise to worries that this may encourage other countries to follow suit," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.
"But basically the market is hovering around yesterday's level, with eyes on factors such as moves in the U.S. stock market and the currency market."
The benchmark Nikkei inched down 14.55 points to 9,659.94, after falling as far as 9,628.67, its lowest since July 22. Last week, the index shed 5.2 percent, its worst weekly loss in about three months.
The broader Topix was flat at 866.68.
"If the Nikkei breaks below 9,500, the next target will likely be around 9,000, provided the market sees further strength in the yen and another round of falls in U.S. stocks," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
Fast Retailing slid 2.9 percent to 13,140 yen, weighing on the market a day after it leapt 15 percent on news that domestic same-store sales at its Uniqlo casual-clothing chain jumped 32 percent in September.
STRONG YEN JITTER
Among exporters, Canon slipped 1.2 percent to 3.350 yen, while Panasonic Electric Works Co slid 2.5 percent to 992 yen.
The yen stood around 89.10 yen to the dollar in Asia trade. It hit an eight-month high of 88.23 yen to the greenback last week.
Many Japanese exporters have set their exchange rate assumptions for the dollar around 90-95 yen for the current fiscal year to March. A stronger Japanese currency eats into exporters' profits when they are repatriated.
"Recent strength in the yen is keeping investors from actively buying on dips as the strong yen could force exporters to lower their earnings forecasts for the second half of the business year," said Takahiko Murai, general manager of equities at Nozomi Securities.
Defensive sectors fell after gaining the previous day in the face of a decline in shares of exporter companies, with KDDI Corp, Japan's No.2 phone operator, shedding 1.8 percent to 502,000 yen.
Among gainers, Japan's top bank Mitsubishi UFJ climbed 2.6 percent to 467 yen and Mizuho Financial Group ( MFG - news - people ) added 1.7 percent to 182 yen.
U.S. financial stocks rallied on Monday, and were the top positive on the S&P 500 index after Goldman Sachs upgraded the large-cap bank sector, saying share prices for companies in the industry didn't reflect their earnings power.
Mazda ( MZDAF.PK - news - people ) Motor jumped 4.9 percent to 194 yen after it said it would raise up to $1.1 billion in a share sale to invest in hybrid and other technologies in what analysts said was a long-overdue bid to close the gap with rivals. It also halved its net loss forecast for the year to March. (Editing by Edwina Gibbs)
