Yen Rises

The yen rose the most against the dollar in a week and climbed versus the euro on speculation a drop in stocks will prompt investors to sell higher-yielding assets and pay back low-cost loans in Japan's currency.

Japan's yen also gained against the Australian dollar and the South African rand on bets the deepening global economic slump will discourage carry trades. The pound rose against the dollar and the euro as minutes of this month's Bank of England meeting indicated policy makers may be prepared to cut interest rates again to revive the economy.

The yen rose 1 percent to 96.09 against the dollar at 2:35 p.m. in New York, from 97.03 yesterday. Japan's currency gained 1.2 percent to 120.92 per euro from 122.43. The euro fell 0.3 percent to $1.2580 from $1.2618.

Turkey's lira tumbled 3.9 percent to 1.7264 per dollar after the central bank reduced its benchmark interest rate by a half-percentage point to 16.25 percent. The lira depreciated to 1.7402 on Oct. 23, the weakest level since June 2006.

The Swiss franc dropped as much as 0.9 percent to 1.2145 against the dollar, the weakest level since September 2007, on signs the country's economy is entering a recession. Against the euro, the franc slid as much as 0.9 percent to 1.5328, the weakest level since Oct. 21.

Japan's currency increased 1.8 percent to 62.19 against the Australian dollar and 3.3 percent to 9.18 versus the rand on bets investors will unwind trades in which they 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 12 percent in South Africa.

Sterling rose 0.3 percent to $1.5003 after Bank of England minutes showed policy makers considered an even bigger reduction in the benchmark interest rate than the cut of 1.5 percentage point announced Nov. 6. The pound appreciated 0.7 percent to 83.79 pence per euro today.

A cut to less than 2.5 percent was discussed at the Monetary Policy Committee's meeting, according to minutes published today by the central bank in London. Governor Mervyn King and his colleagues voted 9-0 to lower the rate to 3 percent from 4.5 percent.

The dollar earlier extended its drop against the euro after weakening beyond $1.27, where sell orders were clustered, according to traders. It erased losses after the U.S. stock decline accelerated, sparking renewed demand for the greenback as a haven. The dollar has slid 3 percent since touching $1.2330 per euro on Oct. 28, the strongest level since April 2006., Bloomberg
11/19/2008 12:36:08 PM