The euro also weakened after the European Commission said the region may suffer a substantial” effect from the financial crisis next year. The yen traded near a 13-year high against the dollar even after the Bank of Japan lowered its benchmark interest rate to 0.1 percent.
The dollar climbed 2.7 percent to $1.3872 versus the euro at 2:17 p.m. in New York, from $1.4240 yesterday, when it slumped to a 12-week low of $1.4719. It gained as much as 3 percent, the biggest intraday increase since Oct. 24. The euro fell 2.4 percent to 124.39 yen from 127.44. The dollar traded at 89.70 yen, compared with 89.43. It dropped to 87.14 yen two days ago, the lowest level since 1995.
The U.S. currency declined 2.9 percent against the euro on Dec. 17, the biggest drop since the 15-nation currency’s 1999 debut. The Fed lowered its target lending rate a day earlier to a range of zero to 0.25 percent. It reiterated plans to purchase agency debt and mortgage-backed securities and said it will study buying Treasuries.
Brazil’s real gained the most against the dollar among the 16 major currencies tracked by Bloomberg today, climbing 2.6 percent to 2.3655, on speculation the yield advantage of local fixed-income assets will continue to attract foreign investors. The central bank held the benchmark Selic lending rate at 13.75 percent on Dec. 10.
The yen gained 25 percent against the dollar this year, the most since 1987, as more than $1 trillion of credit-market losses and a global economic slowdown encouraged Japanese investors to unwind overseas investments and bring money home. Japan’s currency appreciated 1.9 percent this week in its seventh straight advance, the longest rally in four years.