Yen Falls Versus Euro, Dollar

The yen fell the most in three weeks against the euro amid speculation a U.S. government plan to buy stakes in banks within weeks will revive investors demand for higher-yielding assets funded in Japan.

Japan's currency also tumbled versus the U.S., Australian and New Zealand dollars as policy makers' efforts to unlock credit markets and joint interest-rate cuts by central banks yesterday encouraged investors to resume carry trades. Brazil's real rose for the first time this month, a day after its central bank drew on its foreign reserves to defend the currency.

Japan's currency fell 1.8 percent to 137.83 versus the euro at 2:10 p.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 1.6 percent to 100.72 per dollar. It touched 98.61 yesterday, the strongest since March 27. The euro fell 0.3 percent to $1.3689.

Japan's yen weakened 7.5 percent to 70.79 against the Australian dollar and dropped 4.4 percent to 62.13 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.

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.

Brazil's real jumped as much as 7.9 percent to 2.1498 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., Bloomberg
10/9/2008 12:42:04 PM