The euro had its biggest one-day drop against the yen since its 1999
debut as the deepening credit crisis prompted European governments to
pledge bailouts for troubled banks while stopping short of coordinated
action.
The 15-nation currency fell below $1.35 for the first time since August
2007 after European authorities avoided announcing any plan comparable
to the $700 billion U.S. bailout. The yen rose the most against the
dollar in a decade as a plunge in global stocks encouraged investors to
sell higher-yielding assets and pay back low-cost loans in Japan.
``What's driving the market is concern the institutional framework in
Europe is not conducive for policy makers to get ahead of the crisis,''
said Todd Elmer, currency strategist at Citigroup Global Markets Inc.
in New York. ``The picture for Europe is pretty gloomy.''
The dollar rose against the euro today on a surge in demand for U.S.
currency funding as banks remained reluctant to lend to each other. The
greenback gained 5.8 percent last week in its biggest rally since the
euro's inception.
``Much of the euro-dollar move has been about the huge demand for
dollar liquidity,'' said Alan Ruskin, head of international currency
strategy in North America at RBS Greenwich Capital Markets Inc. in
Greenwich, Connecticut. ``I won't be standing in front of a running
train.''
`There's a capitulation of emerging-market currencies,'' said
Citigroup's Elmer. ``There were massive flows to emerging markets over
the past years. We're seeing a reversal of that, which is providing
support to the dollar. There's certainly further room to run.''