Dollar Slumps Below 90 Yen

The dollar slumped below 90 yen for the first time in 13 years after the U.S. Senate rejected a $14 billion bailout for General Motors Corp. and Chrysler LLC.

The U.S. currency headed for a sixth week of declines versus the yen as the automakers failed to obtain the funds they need to survive until next year. The yen rose against all the major currencies as Finance Minister Shoichi Nakagawa told reporters in Tokyo today Japan isn’t considering intervening in currency markets now.

The dollar weakened to 88.53 yen, the lowest level since August 1995, before trading at 90.35 at 7:12 a.m. in New York, from 91.45 yesterday. The euro fell 1.4 percent to 120.39 yen from 122.09 and 0.2 percent to $1.3323 from $1.3352 as investors pared holdings of higher-yielding currencies.

The dollar fell 19 percent against the yen this year, the most since 1987, as $986 billion of credit-market losses sparked a seizure in money markets and threw the U.S. economy into a recession. The dollar dropped 2.6 percent against the yen this week and 4.6 percent against the euro.

Japan’s yen advanced 3.6 percent to 59.32 versus the Australian dollar and 3.4 percent to 8.87 against the South African rand on speculation investors will unwind carry 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 11.5 percent in South Africa and 4.25 percent in Australia.

The dollar also fell on speculation the Federal Reserve will lower interest rates toward zero to combat a recession, reducing the appeal of the country’s assets.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 0.3 percent to 83.62. It touched 88.463 on Nov. 21, the highest since April 2006.,
12/12/2008 5:37:36 AM