The yen rose against the euro, the Australian dollar and New Zealand's currency as a drop in stocks encouraged investors to sell higher-yielding assets and pay back low-cost loans in Japan. The Canadian dollar and Norwegian krone fell against the U.S. currency as crude oil futures slid more than $4 a barrel, the steepest drop in almost three weeks.
The dollar dropped 0.8 percent to 98.89 yen at 1:15 p.m. in New York from 99.7 yesterday. The dollar fell 0.3 percent to $1.3017 per euro from $1.2981 yesterday, when it fell 2.6 percent, the most since the 15-nation currency began trading nine years ago. The euro depreciated 0.6 percent to 128.70 yen from 129.47.
The Canadian dollar dropped 0.8 percent to C$1.1597 per U.S. dollar and the krone decreased 1.3 percent to 6.7119 as crude oil futures for December delivery dropped $4.83 to $65.70 a barrel. Crude oil and natural gas accounted for 17 percent of Canada's export revenue in 2007, while Norway is the world's fifth-largest oil supplier.
Japan's currency increased 1.1 percent to 68.96 against the Australian dollar and 0.7 percent to 60.02 versus New Zealand's currency on speculation the drop in stocks will discourage carry trades, in which investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.3 percent target lending rate compares with 5.25 percent in Australia and 6.5 percent in New Zealand.
The yen's real effective exchange rate, a measure of its value against the currencies of Japan's trading partners after adjustments for price trends, rose 11.2 percent in October from the previous month, the biggest gain on record, Bank of Japan data showed. The index was at 111.1, the highest level since August 2005.
Japan's currency dropped against the dollar and the euro yesterday as U.S. stocks rallied the most on a presidential Election Day since the New York Stock Exchange first opened for trading on a voting day in 1984.
The yen and the dollar posted the biggest monthly gains versus the euro in October since the currency debuted in 1999 as signs of a global recession led investors to seek safety in the Japanese and U.S. currencies.