he greenback traded near a one-week low versus the euro after the Federal Reserve's reduction yesterday. The dollar dropped the most in a decade against South Korea's won and declined versus currencies of Brazil, Mexico and Singapore as the Fed agreed to provide $120 billion. The yen fell versus the euro on bets the Bank of Japan will lower borrowing costs.
The dollar traded at $1.2961 per euro at 10:19 a.m. in New York, from $1.2963 yesterday. It touched $1.3292, the weakest since Oct. 21. The yen dropped 1.2 percent to 98.60 per dollar from 97.39. The euro gained 1.2 percent to 127.71 yen from 126.26. It has gained 11 percent in three days.
The dollar declined as much 12.6 percent to 1,246.50 won, the biggest decline since December 1997, after the Fed agreed to provide South Korea with a $30 billion swap line, helping ease a shortage of U.S. currency among banks and companies. The currency sank two days ago to a decade-low of 1,495.95 as mounting risk aversion prompted investors to dump emerging- market assets.
The Australian dollar rose 1.2 percent to 68.54 U.S. cents on speculation a rate cut in China, the world's largest consumer of industrial metals, will boost demand for Australia's exports.
The yen fell 2.4 percent to 67.68 versus the Australian dollar and 1.8 percent to 58.05 against the New Zealand dollar on speculation investors will sell Japan's currency to buy assets in countries where interest rates are higher. Interest rates are 0.5 percent in Japan, 6 percent in Australia and 6.5 percent in New Zealand.
The yen also declined as investors speculated that the Bank of Japan will cut borrowing costs tomorrow. It slumped the most since 1974 versus the dollar on Oct. 28 after the Nikkei newspaper said policy makers are leaning toward lowering rates.