The 15-nation currency also weakened against the British pound after Belgian Prime Minister Yves Leterme said Dexia will receive about $9.2 billion to shore up its capital. The dollar rose against the yen on speculation the U.S. Senate will salvage a $700 billion bank-bailout plan as early as tomorrow after Congress rejected it yesterday.
The euro fell 2.5 percent to $1.4077 at 10:52 a.m. in New York, from $1.4434 yesterday. The euro also slid to 149.85 yen from 149.49. It earlier reached 148.84, the weakest since Sept. 17. The yen weakened to 106.12 per dollar from 104.18, after earlier reaching 103.54, the most since Sept. 16.
The Australian dollar rose 1.2 percent to 84.84 yen after falling 4.9 percent yesterday. The New Zealand dollar gained 2.2 percent to 71.55 yen after dropping 3.7 percent yesterday.
The yen typically declines when demand for high-yielding currencies rises, as traders put on so-called carry trades. In such transactions, investors get funds in countries with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 7 percent in Australia and 7.5 percent in New Zealand.
The yen rose the most of all 16 most-actively traded currencies yesterday after the Standard & Poor's 500 Index plunged the most since the 1987 crash.
The Japanese currency is up 11.7 percent against the euro this quarter. The dollar has fallen 0.8 percent against the yen, paring a 7 percent gain in the previous three months. The euro is down 9.8 percent against the dollar.
Consumer confidence in the U.S. unexpectedly rose in September in a survey taken before the recent worsening of the credit crisis and plunge in stocks. The Conference Board's confidence index increased to 59.8, a third consecutive increase, from 58.5 the prior month, the New York-based group said today.
Another report showed business activity slowed less than forecast this month. The National Association of Purchasing Management-Chicago's index fell to 56.7 in September from 57.9 the prior month. Fifty is the dividing line between growth and contraction.
Brazil's real rose for the first time in three days on speculation U.S. lawmakers will try to revive a $700 billion rescue plan for financial markets. The real gained 1.9 percent to 1.9259 per dollar at 8:21 a.m. New York time. The currency fell yesterday the most in nine years, weakening past the 2-per-dollar level for the first time this year.
The ruble fell against the dollar and was headed for its biggest monthly drop versus Russia's currency basket since its introduction in 2005, as stocks slid after U.S. lawmakers rejected a $700 billion bank bailout. Russia's currency was at 25.4879 per dollar by 4:39 p.m. in Moscow, from 25.3059 yesterday. It's headed for a 3.3 percent loss versus the dollar in the month, after falling 5.1 percent in August.