Japan's yen plunged versus the Australian and New Zealand dollars on speculation investors will buy higher-yielding assets funded by low-cost loans. The Bank of Japan is ``leaning toward'' reducing its target lending rate by a quarter- percentage point to 0.25 percent, Nikkei reported today.
The dollar gained 5 percent to 97.38 yen at 4:09 p.m. in New York, from 92.78 yesterday, for the biggest rally since January 1974. The yen slid 6.3 percent to 123.73 per euro from 115.92. It was the currency's biggest drop since the 15-nation euro's 1999 debut. The euro rose 1.7 percent to $1.2708 from $1.2493 after touching $1.2330, the lowest since April 2006.
Japan's currency has jumped 21 percent versus the euro, 34 percent against the Australian dollar and 29 percent versus the New Zealand dollar this month as the global credit crisis and a stock rout erased more than $12 trillion in equity value.
Japan's currency dropped 11 percent to 62.70 against the Aussie and 9.9 percent to 55.19 versus the New Zealand dollar on speculation investors will revive 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 lending rate compares with 3.75 percent in Europe, 6 percent in Australia and 6.5 percent in New Zealand.
The Aussie appreciated 6.9 percent to 64.28 U.S. cents after touching 60.09 cents yesterday, the weakest level since April 2003. The Reserve Bank of Australia bought its currency for a third day to stem losses.
Brazil's real rose 4.2 percent to 2.1610 against the dollar, the Mexican peso advanced 3.8 percent to 13.0305 and the South African rand increased 6.4 percent to 10.3337 on reduced aversion to higher-yielding, emerging-market assets.