Yen Tumbles as Global Interest-Rate Cuts Revive Risk Appetite

The yen fell the most in three weeks against the euro as a flurry of central bank interest-rate cuts helped arrest a slump in stocks, curbing sales of higher- yielding assets funded in Japan.

Japan's currency also tumbled versus the U.S., Australian and New Zealand dollars as equities in Asia and Europe rebounded. Yen weakened 6.9 percent to 70.76 against the Australian dollar and dropped 4.8 percent to 62.41 per New Zealand dollar. Yesterday, the yen jumped to 63.78 versus the Aussie and 57.31 against the kiwi, the highest levels since September 2002.

Japan's currency fell 2 percent to 138.10 versus the euro at 8:56 a.m. in New York, from 135.39 yesterday when it touched 134.96, the strongest since August 2005. It earlier fell as much as 3.2 percent, the biggest drop since Jan. 11, 2001. The yen declined 1.67 percent to 100.82 per dollar. It touched 98.61 yesterday, the strongest since March 27. The euro rose 0.3 percent to $1.3689.

The yen has surged 19 percent versus the Australian dollar, 14 percent against New Zealand's currency and 8 percent against the euro this month as investors pared so called carry trades, in which investors get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. Japan's benchmark rate is 0.5 percent, compared with 6 percent in Australia and 7.5 percent in New Zealand.

The Australian dollar rose by the most since it began trading freely in December 1983 against the yen after central banks cut interest rates to ease a financial crisis. New Zealand's currency also gained.  Against the U.S. dollar, the Australian currency advanced 5.4 percent to 69.40 U.S. cents from 65.85 yesterday. The New Zealand dollar climbed 2.5 percent to 60.87 cents from 59.36.

Canada's currency rose for the first time in more than a week, snapping its longest losing streak in almost two months, as its U.S. counterpart fell versus most of the world's major currencies. The Canadian dollar rose as much as 0.81 percent to C$1.1126 per U.S. dollar, from C$1.1281 yesterday at 9:45 a.m. in Toronto.

Brazil's real jumped 7.4 percent to 2.17 per dollar, the biggest one-day gain since August 2002. Brazil's central bank sold dollars for the first time in five years yesterday when the currency fell to 2.55, the lowest since April 2005.

Chinese yuan
fell against the dollar after China cut interest rates for the second time in three weeks to shield the world's fourth-largest economy from global financial turmoil. The currency dropped 0.09 percent to 6.8231 a dollar in Shanghai as of 1:40 p.m., from 6.8171 yesterday, according to the China Foreign Exchange Trade System.

Russia's  ruble rose for a second day against the dollar after seven central banks around the world cut interest rates in an effort to calm the turmoil in financial markets, reviving sentiment for emerging-market assets. The managed currency rose to as high as 26.0175 per dollar and was at 26.1021 by 7:16 p.m. in Moscow, from 26.1739 yesterday,
10/9/2008 6:56:38 AM