Yen Rises to Three-Year High


The yen climbed to a three-year high against the euro and gained versus the dollar on bets central banks will lower borrowing costs to limit the global economic slump, encouraging investors to sell higher-yielding assets.

The yen appreciated 3 percent to 131.89 per euro, from 135.92 yesterday, after earlier touching 131.11, the strongest level since June 2005. The yen advanced 1.4 percent to 100.46 per dollar from 101.86. The Japanese cuurrency rose 6.5 percent to 45.18 versus the Brazilian real and 2.8 percent to 61.74 per New Zealand dollar on bets investors will unwind carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target rate compares with 13.75 percent in Brazil and 7.5 percent in New Zealand.

The dollar rose to a 19-month high against the euro on bets the European Central Bank will reduce interest rates at a faster pace than the Federal Reserve. The U.S. currency appreciated 1.7 percent to $1.3120 per euro from $1.3344. It touched $1.3079, the strongest level since March 2007 at 2:44 p.m. in New York.

Canadian dollar dropped to the lowest against the greenback since August 2005 as the central bank cut its main lending rate. The currency dropped as much as much as 2.5 percent to C$1.2208 per U.S. dollar after the Bank of Canada reduced its benchmark interest rate by a quarter-percentage point to 2.25 percent. Policy makers said in a statement that ``some further monetary stimulus will likely be required.''

Brazil's real slid 4.8 percent to 2.2255 per dollar and South Africa's rand dropped 3.2 percent to 10.5250 per dollar as concern the global economy will fall into a recession led investors to sell emerging-market currencies.

Australian dollar fell as policy makers signaled they may trim borrowing costs further. The currency fell 2.9 percent to 68.63 U.S. cents as minutes of the Reserve Bank's Oct. 7 meeting showed policy makers said inflation will slow at a faster rate than previously expected as the economy slows, fueling expectations for another cut. The rate was lowered at this month's meeting by 1 percentage point, the most since 1992, to 6 percent.

Russia's ruble weakened for a fifth straight day against the dollar on speculation banks and companies are converting funds borrowed from the government into foreign exchange on concern the currency will be devalued. The currency lost as much as 0.8 percent to 26.5811 per dollar, and traded at 26.5560 by 3:28 p.m. in Moscow, from 26.3608 yesterday. It rose 0.2 percent to 35.1034 per euro, from 35.1659.

India's rupee fell, closing at a record low, as overseas investors increased sales of local equities on concern the global credit-market crisis will slow growth in Asia's third-biggest economy. The currency slid 0.2 percent to 49.09 per dollar at the 5 p.m. close in Mumbai, according to data compiled by Bloomberg.


TradingEconomics.com, Bloomberg.com
10/21/2008 12:43:23 PM