Dollar Declines

The dollar fell to a 13-year low against the yen and the weakest level versus the euro since late September after the Federal Reserve cut its target to as low as zero and pledged to buy unlimited quantities of securities.

The pound fell to a record against the euro after a government report showed U.K. unemployment rose last month at the fastest pace since 1991. The yen remained higher even as Dow Jones Newswires reported that Japan’s finance minister said he’s ready to take steps in the currency market.

The dollar dropped 0.7 percent to 88.46 yen at 8:32 a.m. in New York, from 89.05 yesterday, after reaching 88.18, the lowest since August 1995. Against the euro, the dollar weakened for a sixth day, declining to $1.4096 from $1.4002 yesterday. It touched $1.4192, the weakest level since Sept. 30. The euro traded at 124.64 yen, compared with 124.71.

The pound fell to an all-time low against the euro for an eighth day after the Office for National Statistics said the number of people receiving jobless benefits rose by 75,700 to 1.07 million. Bank of England policy makers voted 9-0 to cut the nation’s benchmark on Dec. 4 to 2 percent, minutes showed. Sterling weakened as much as 2.3 percent to 92.07 pence per euro. The pound fell 1.7 percent to $1.5386.

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 0.8 percent to 80.070.

The dollar fell 12 percent from a 2 1/2-year high of $1.2330 per euro on Oct. 28 on reduced demand for short-term funding in the greenback.

The cost of borrowing in dollars for three months in London fell today after the Fed’s rate cut. The London interbank offered rate, or Libor, that banks say they charge each other for such loans dropped 0.27 percentage point to 1.58 percent, the lowest level since July 2004, British Bankers’ Association data showed.

The U.S. currency fell 21 percent against the yen this year, the most since 1987, as more than $1 trillion of credit- market losses sparked a seizure in money markets and threw the U.S. economy into a recession., Bloomberg
12/17/2008 6:49:06 AM