ForeX

Oct. 28 — The yen fell the most against the euro since January 2001 and dropped versus the dollar as a rebound in global stocks encouraged investors to reduce bets against higher-yielding currencies.

The currency declined versus the Australian and New Zealand dollars on speculation carry trades will get a boost and Japan’s central bank will sell the yen for the first time in four years to help exporters. South Africa’s rand, Mexico’s peso and Brazil’s real advanced versus the dollar on reduced aversion to higher-yielding, emerging-market assets.

“Some players, enticed by a positive reading in stocks, are jumping in to briefly trade on risk,” said Adam Fazio, a currency strategist at CIBC World Markets Inc. in New York. “Intervention by the Japanese is a wild card.”

The yen slid 3.9 percent to 120.46 per euro at 1:13 p.m. in New York, from 115.92 yesterday, when it touched 113.64, the strongest level in more than six years. The yen fell 4 percent to 96.49 per dollar from 92.78. It reached 90.93 on Oct. 24, the strongest since August 1995. The euro dropped 0.1 percent to $1.2478 after touching $1.2330, the weakest since April 2006.

Japan’s currency dropped 8.8 percent to 60.71 against the Aussie and 6.1 percent to 53.28 versus the New Zealand dollar on speculation investors will revive trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan’s 0.5 percent target lending rate compares with 3.75 percent in Europe, 6 percent in Australia and 6.5 percent in New Zealand.

Stock Gains

The Standard & Poor’s 500 Index increased 2.9 percent after Japan’s Nikkei 225 Stock Average rebounded from the lowest level in 26 years. The S&P 500 fell yesterday to the lowest level since March 2003 on concern the credit crunch will cause the global economic slump to deepen.

In a sign financial institutions are becoming less nervous about extending loans, the London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars fell 0.04 percentage point to 3.47 percent, its 12th straight drop, according to the British Bankers’ Association. The Federal Reserve began buying short-term corporate debt yesterday to revive lending markets.

“We’re seeing a little bit of confidence shored up with the Fed commercial paper facility opening up,” said Jessica Hoversen, a fixed-income and currency analyst at MF Global Ltd. in Chicago.

The yen pared losses against the dollar after the Conference Board, a New York-based research group, said its consumer confidence index decreased to 38, the lowest reading since monthly records began in 1967.

Yen This Month

Japan’s currency has jumped 25 percent versus the euro, 42 percent against the Australian dollar and 36 percent versus the New Zealand dollar this month as the global credit crisis and a stock rout erased more than $12 trillion in equity value.

A surge in the yen is eroding Japanese exporters’ overseas income. Honda Motor Co., Japan’s second-largest automaker, cut its operating profit forecast today for the year ended in March by 13 percent to 550 billion yen ($5.8 billion).

“At this point, it would be bad to bet against intervention” by the Bank of Japan, said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London, in an interview on Bloomberg Television. “Currencies are being driven by risk appetite and anxiety in the market.”

Japan’s Economic and Fiscal Policy Minister Kaoru Yosano said in Tokyo that abrupt increases in currency volatility are “undesirable.” Finance Minister Shoichi Nakagawa said yesterday the government is ready to act if needed.

`Purely Japanese’

French Finance Minister Christine Lagarde said yesterday any intervention would be “purely Japanese” after the Group of Seven issued an unscheduled statement that it was concerned “about the recent excessive volatility” in the yen.

Unilateral intervention by the Japanese authorities may limit the effectiveness of the action in currency markets, wrote Stephen Jen, global head of currency research at Morgan Stanley in London, in a research note yesterday.

“I’m not sure how effective such interventions will be,” Jen wrote. “My best guess is that they will help to temper the flows but not reverse the trend.”

The Aussie appreciated 4.7 percent to 62.96 U.S. cents after touching 60.09 cents yesterday, the weakest level since April 2003. The Reserve Bank of Australia bought its currency for a third day to stem losses.

The real rose 3.1 percent to 2.1800 against the dollar, the peso advanced 1.3 percent to 13.3525 and the rand increased 3.6 percent to 10.5950 on demand for assets in emerging markets.

The euro may weaken to $1.22 this week as the “worries over Europe’s economy are heightening,” said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank AG in Tokyo. European Central Bank President Jean-Claude Trichet said yesterday policy makers may cut interest rates next week.

The Fed will lower its 1.5 percent target lending rate by a half-percentage point at the conclusion of its two-day policy meeting tomorrow, according to the median forecast of 65 economists surveyed by Bloomberg News.

Oct. 10 — Canada’s dollar headed for the biggest weekly slump since at least 1971 as the deepening credit crisis drove investors to take refuge in the U.S. dollar.

The Canadian currency has declined 9.2 percent this week against its U.S. counterpart, touching the lowest since August 2005 today, as prices for commodities including crude oil plummeted and global stock markets plunged.

“The Canadian dollar has become the whipping boy,” said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. “This is still part of the bigger picture of demand for U.S. dollars.”

The Canadian dollar dropped as much as 4.2 percent today to C$1.1983 per U.S. dollar, from C$1.1501 yesterday, the weakest since Aug. 30, 2005. The currency fell for a seventh day, its longest losing streak since the period ended Aug. 11. It last traded at C$1.1908 at 11:53 a.m. in Toronto. One Canadian dollar buys 83.99 U.S. cents.

Crude oil for November delivery fell as much as $7.98, or 9.2 percent, to $78.61 a barrel on the New York Mercantile Exchange. It closed at $93.88 a week ago and reached a record $147.27 on July 11.

The Canadian currency briefly pared its loss today after a government report showed the nation recorded its biggest one- month employment gain in at least 30 years during September.

`Ignoring the Data’

“People are ignoring the underlying data and dwelling on the uncertainty for the global economy,” said Millan Mulraine, an economics strategist at TD Securities in Toronto. “We should expect that to continue.”

Canada added 106,900 jobs last month after a gain of 15,200 positions in August, Statistics Canada said today in Ottawa. The median forecast of 20 economists surveyed by Bloomberg News was for an increase of 10,000 in September. Canada’s unemployment rate held at 6.1 percent.

“Data isn’t driving the currency these days,” said Shane Enright, currency strategist at CIBC World Markets Inc. in Toronto. “Oil is lower because credit spreads continue to widen and equity markets continue to plunge. Oil and the Canadian dollar moves are the secondary effects of these factors.”

The Bank of Canada joined the Federal Reserve, the European Central Bank and other global counterparts on Oct. 8 in reducing interest rates to ease the financial crisis. The Canadian target lending rate was cut to 2.5 percent from 3 percent. The Bank of Canada next meets Oct. 21.

Another Weekly Decline

Canada’s dollar has weakened 13 percent since Sept. 26 as turmoil in global financial markets prompted investors to seek the relative safety of U.S. government debt. The Canadian currency, dubbed the loonie because of the aquatic bird on the one-dollar coin, slumped 4.5 percent last week.

“We are still heading into a very challenging macro- economic environment for the Canadian dollar,” said David Watt, a senior currency strategist at RBC Capital Markets in Toronto, a unit of Canada’s biggest bank by assets. “The outlook has not changed. The Canadian dollar can’t escape the macro background, but it can avoid the worst of the fear and panic-driven mania.”

Other commodity-based currencies, including those in Brazil, Australia and New Zealand, have declined versus the Canadian dollar so far this week.

“As commodity prices continue to fall and political uncertainty rises we have become increasingly cautious on the Canadian dollar,” wrote Citigroup Global Markets Inc. strategists Shyam Devani, Todd Elmer, Tom Fitzpatrick, Michael Hart and Mike Rosborough.

The yield on the two-year government bond slipped 31 basis points, or 0.31 percentage point, to 2.22 percent this week. The price of the 2.75 percent security due in December 2010 climbed 61 cents during the period to C$101.10.

The 10-year note’s yield increased 21 basis points to 3.79 percent during the week. The price of the 4.25 percent security maturing in June 2018 fell C$1.74 to C$103.65.

The 10-year bond yielded 157 basis points more than the two- year security, up from 106 basis points a week ago. The so-called yield curve is the steepest since September 2004.