The yen also declined against the Australian and New Zealand dollars after the Nikkei newspaper said the BOJ is ``leaning toward'' reducing its target rate by a quarter- percentage point to 0.25 percent on Oct. 31. The dollar fell versus the euro and the yen on speculation the Federal Reserve will cut its 1.5 percent rate by at least half a percentage point later today.
The yen was at 124.74 per euro at 9:37 a.m. in Tokyo from 124.32 yesterday, when it fell 6.8 percent, its biggest decrease since the 15-nation euro's 1999 debut. The dollar fell to 97.67 yen from 98.03 late yesterday and declined to $1.2766 per euro from $1.2683. The pound rose to $1.6035 from $1.5901.
Against the Australian dollar, the yen fell to 64.54 from 64.13 late yesterday in New York. It also declined by 1 percent versus the New Zealand dollar to 55.81. The Nikkei 225 Stock Average rose 7.6 percent, reflecting increased appetite for riskier assets.
In carry trades, investors borrow in currencies with low interest rates and invest in nations with higher yields. Japan's target rate of 0.5 percent is the lowest among major economies.
Japan's currency has jumped 20 percent versus the euro, 33 percent against the Australian dollar and 27 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 0.5 percent today versus the pound to 156.47 on speculation investors will revive carry trades.