Brazil's real and South Africa's rand advanced versus the dollar on revived investor interest in emerging markets. The yen dropped against the dollar, the euro, the Australian dollar and New Zealand's currency as a global rally in stocks encouraged investors to buy higher-yielding assets financed by low-cost loans in Japan's currency.
The dollar depreciated 2.4 percent to $1.2952 per euro at 2:57 p.m. in New York, from $1.2643 yesterday. The euro climbed 2.9 percent to 129.02 yen from 125.33. The yen fell 0.5 percent to 99.63 per dollar from 99.12.
The London interbank offered rate, or Libor, that banks charge each other for one-month loans in dollars slid for a 17th day as central-bank cash injections and interest-rate cuts worldwide helped revive lending. The rate dropped 0.18 percentage point to 2.18 percent, the lowest level since November 2004, according to the British Bankers' Association.
U.S. stocks gained, with the Standard & Poor's 500 Index increasing 2.8 percent and the Dow Jones Industrial Average advancing 2 percent.
Australia's dollar rose 2.8 percent to 69.56 U.S. cents and the New Zealand currency increased 2 percent to 60.31 on speculation revived bank lending will boost demand for the countries' assets. The Aussie fell earlier as much as 2.4 percent to 66.03 U.S. cents after the Reserve Bank lowered the cash rate by 0.75 percentage point from 6 percent.
The yen fell 3.3 percent to 69.34 against the Australian dollar and 2.5 percent to 60.11 versus New Zealand's currency on speculation stock gains will boost carry trades, in which investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.3 percent compares with 5.25 percent in Australia and 6.5 percent in New Zealand.
The pound dropped 1.7 percent to 81.30 pence per euro as a report showed Britain's construction industry contracted in October at the fastest pace in more than a decade. The Bank of England will cut the main interest rate by a half-percentage point to 4 percent on Nov. 6, according to the median forecast of 60 economists surveyed by Bloomberg News.
The dollar has gained 20 percent against the currencies of six trading partners since mid-July as the credit crisis encouraged investors to seek a haven in the greenback.
The dollar has gained every year after a presidential election since 1985, Halpenny wrote. The U.S. currency has weakened 28 percent since Bush was inaugurated in 2001.