Yen, Dollar Post Record Monthly Gains

The yen and the dollar rose against the euro and posted record monthly gains as signs of a global recession led investors to seek safety.

The euro also weakened as inflation in the 15 nations that share the currency slowed to the lowest since January, making room for the European Central Bank to lower borrowing costs. The Bank of Japan cut its target lending rate to 0.3 percent.

The euro weakened as the European Union statistics office reported that inflation in the countries sharing the currency eased to 3.2 percent in October, encouraging speculation that the ECB will cut interest rates for the second time in less than a month in response to the financial and economic crisis.

The yen climbed 1.5 percent to 125.53 per euro at 4:01 p.m. in New York, from 127.31 yesterday. The yen traded at 98.51 against the dollar, compared with 98.61. The dollar rose 1.4 percent to $1.2739 versus the euro from $1.2915.

Japan's currency appreciated 19 percent against the euro in October on speculation the global economic slump will encourage investors to sell higher-yielding assets and pay back low-cost loans in the yen. It was the currency's biggest monthly gain since the euro's introduction in 1999.

The dollar increased a record 10.6 percent this month against the euro and dropped 7.2 percent against the yen, the biggest decline since 1998, when hedge fund Long-Term Capital Management LP collapsed.

The yen increased 3 percent to 65.29 against the Australian dollar today and 1.7 percent to 58.20 versus the New Zealand currency on speculation carry trades will unwind. The Aussie dropped 22 percent against the yen this month, while the kiwi, as New Zealand's currency is known, decreased 19 percent. The target lending rates are 6 percent in Australia and 6.5 percent in New Zealand.

The pound weakened 2.2 percent to $1.6087 after London- based market researcher GfK NOP said U.K. consumer confidence in October fell to the lowest since at least 1974. Sterling has dropped 10 percent this month, the biggest decline since investor George Soros drove the currency out of Europe's system of linked exchange rates in 1992.

Currencies of developing countries tumbled this month on concern a global economic slump will sap demand for emerging- market assets.

South Africa's rand dropped 15 percent to 9.7725 per dollar, the most since 1985. Mexico's peso lost 15 percent to 12.8890 per dollar, the biggest decrease since 1994, when Mexico abandoned its peg to the dollar and devalued the currency. Russia's ruble weakened 5.2 percent to 27.0633.,
10/31/2008 2:01:46 PM