The yen pared its gain against major currencies on speculation investors will sell higher-yielding assets and pay back low-cost loans in Japan’s currency at a slower pace. The pound weakened to a record low against the euro for a fifth day after HBOS Plc said bad loans will keep rising as credit conditions deteriorate.
The dollar traded at 90.83 yen at 1:46 p.m. in New York, compared with 91.45 yesterday, after dropping as much as 3.2 percent to 88.53, the lowest level since August 1995. The euro fell 0.6 percent to 121.40 yen from 122.09. It was quoted at $1.3364, compared with $1.3352.
The Bush administration dropped its opposition to using part of the $700 billion bank bailout to provide financing for U.S. automakers after the Senate failed yesterday to approve emergency loans.
Sterling slid as much as 1.3 percent to 89.97 pence per euro, the weakest level since the 15-nation euro’s 1999 debut. HBOS said this year’s charge for bad loans rose to 5 billion pounds ($7.5 billion).
The yen pared its advances, rising 2 percent to 60.23 versus the Australian dollar and 1.6 percent to 9.02 against the South African rand, on bets investors will slow the unwinding of carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher.
Japan’s currency earlier gained 6.1 percent versus the Aussie and 4.5 percent against the rand. Japan’s 0.3 percent target lending rate compares with 11.5 percent in South Africa and 4.25 percent in Australia. The Standard & Poor’s 500 Index rose 0.2 percent after earlier dropping 2.6 percent.
The U.S. currency fell 18 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 1.8 percent against the yen this week and 4.7 percent against the euro.
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 0.1 percent to 83.79. It touched 88.463 on Nov. 21, the highest since April 2006.