Honda Motor Co. on Monday reported a drop in quarterly profit because of the strong Japanese yen, but it raised its full-year profit forecast in anticipation of further growth in U.S. auto sales.

Honda, Japan's third-largest automaker, predicted net income for the fiscal year ending March 31 would nearly double to 530 billion yen, or $6.2 billion, from last year's weak levels, reported The Detroit News.

But for the fiscal third quarter ended Dec. 31, Honda's income slid 40 percent to 81.1 billion yen, or $995 million, despite its cost-reduction efforts.

Honda said its research and development and administrative expenses rose, but it attributed the decline in earnings mainly to a rise in the yen to near-record levels. A stronger yen increases the cost of making vehicles in Japan and reduces the value of export earnings.

Since April 1, the start of the Japanese fiscal year, the yen has appreciated to trade at 87 to the dollar, on average, from 93 yen the previous year. For the full year, Honda estimates the exchange rate will average 85 yen to the dollar.

The automaker said the yen's rise wiped 45 billion yen, or $550 million, off of its third-quarter operating profit, which was down 29 percent at 126 billion yen, or $1.5 billion.

Noriyuki Matsushima, a Tokyo-based analyst at Citi Investment Research and Analysis, said Honda's operating results were "a positive surprise." Though dented by the strong Japanese currency, they were substantially ahead of his estimates.

Despite the yen's rise against the dollar, Honda expects to benefit from a recovery in the U.S. auto market. It accounts for close to 40 percent of Honda's auto sales.

In the year starting April 1, Honda expects U.S. vehicle sales to rise as much as 10 percent, Honda Executive Vice President Koichi Kondo told reporters in Japan.

The automaker recently launched an all-new Odyssey minivan and is rolling out more new models for the U.S. market, including a redesigned Civic compact coming out in spring.

Honda's auto sales rose in North America during the third quarter but fell in the weak European market and in Japan, where demand dropped after the expiration of a subsidy program similar to "cash for clunkers."

Overall, Honda's auto sales fell 6 percent in the third quarter to 885,000 vehicles. Its motorcycle sales rose 22 percent to 2.9 million units, and power product unit sales increased 16 percent to 1.16 million.

Honda is the world's leading motorcycle and engine manufacturer but fell behind Nissan Motor Co. in auto sales during the 2010 calendar year to become Japan's third-largest carmaker.

Honda sold 3.6 million vehicles last year, while Nissan sold 4.1 million. Toyota is the world's largest automaker with 8.4 million vehicles sold in 2010.

Toyota is scheduled to report its third-quarter earnings on Feb. 8, and Nissan on Feb. 9.