The greenback fell from a 14-month high versus the euro on speculation
the Fed's plan will ease demand for U.S. currency funding among banks.
Australia's Reserve Bank reduce its cash rate by 1 percentage point,
the most since a recession in 1992, triggering speculation other
countries will cut borrowing costs.
``We've seen a dramatic capitulation of risk trades in the past few
days,'' said Robert Sinche, head of global currency strategy at Bank of
America Corp. in New York. ``If there are signs that conditions are
beginning to stabilize, then we can see people return to risk trades
and the yen will weaken.''
The yen dropped from near a three- year high against the euro and slid
against the dollar as the Federal Reserve's announcement that it will
buy commercial paper encouraged investors to resume buying
higher-yielding assets.
The U.S. central bank, invoking emergency powers, will lend against a
special purpose vehicle at the targeted fed funds rate. The unit will
purchase from eligible issuers three-month dollar-denominated
commercial paper at a spread over the three- month overnight-indexed
swap rate, according to a press release in Washington today.
``They are clearly pulling out every imaginable stop to get the credit
market moving again,'' said Shaun Osborne, chief currency strategist at
TD Securities Inc. in Toronto.
Fed Chairman Bernanke will speak about the economy at 17:15 GMT. The minutes from the Sept. 16 FOMC meeting will be released at 18:00 GMT.