The U.S. currency fell starting in Asian trading on speculation some European and U.K. banks were facing funding difficulties. The yen and franc also rose against major currencies on speculation investors were exiting carry-trade purchases of commodities that were financed with cheap loans from Japan and Switzerland.
The dollar declined to 99.30 yen at 2:52 p.m. in New York, from 99.85 yesterday, when it surged 2.7 percent, the most since January 1999. The yen advanced to 154.87 per euro, from 155.95. The dollar traded at $1.5598 per euro, from $1.5625.
Gold plunged the most since June 2006, leading losses in commodities. South Africa's rand fell the most against the yen and franc, losing about 2.5 percent. Canada's dollar sank 1.6 percent versus the U.S. dollar, the most this year.
The U.S. dollar dropped to 1.0006 Swiss franc from 1.0024. The franc, often favored in times of crisis, has advanced 14 percent this year.
Japan's benchmark rate is 0.5 percent and Switzerland's is 2.75 percent. Traders have borrowed at those rates to buy assets from gold to the Brazilian real, which gained 21 percent in the past year as the country's 11.25 percent benchmark rate lured buyers. Gold was up 20 percent this year before today.
The Standard & Poor's 500 index fell 1.6 percent, crimping demand for carry trades. It gained as much as 0.8 percent earlier and the dollar pared losses versus the euro after Morgan Stanley said net income fell 42 percent in the first quarter to $1.45 a share, beating the average estimate of $1.01 a share in a Bloomberg survey. The dollar also got support as regulators for Fannie Mae and Freddie Mac eased capital requirements to allow them to buy more loans.
The dollar began its decline versus the yen earlier on speculation some European and U.K. banks, including HBOS Plc, Britain's biggest mortgage lender, will report more writedowns related to subprime-mortgage investments.