The yen rose to a three-year high against the euro and gained versus
the dollar on concern interest-rate cuts by global central banks may
fail to boost confidence, encouraging the sale of higher-yielding
assets.
The Federal Reserve reduced its target lending rate by a
half-percentage point to 1.5 percent, while the European Central Bank
and the central banks of the U.K., Canada, Sweden and Switzerland also
reduced rates. Separately, China's central bank lowered its key
one-year lending rate.
The Bank of Japan held its target lending rate at 0.5 percent
yesterday, compared with 7.5 percent in New Zealand and 5.75 percent in
Norway. The Reserve Bank of Australia cut its cash rate by 1 percentage
point to 6 percent yesterday.
``They waited too long to sort these things out,'' said Scott Ainsbury,
a portfolio manager who helps manage $14.6 billion in currencies at New
York-based FX Concepts Inc. ``It's not enough. You buy nothing else but
the dollar and the yen.''
``It's a war on many fronts,'' said Alan Ruskin, head of international
currency strategy in North America at RBS Greenwich Capital Markets
Inc. in Greenwich, Connecticut. ``Rate cuts are a small part of the
solution. There's no silver bullet.''
The Fed also reduced its rate on direct loans to banks, the discount
rate, by a half-point to 1.75 percent. The U.S. central bank said
yesterday it would set up a special vehicle to buy commercial paper to
help revive the corporate-debt market.
Finance ministers and central bankers from the Group of Seven nations
will meet in Washington on Oct. 10 to discuss the financial crisis.
Measures to stabilize global stock markets will be on the agenda,
according to a Japanese official who briefed reporters on condition of
anonymity before the central banks' announcement. The G-7 comprises
Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
``The actions are a good sign for the upcoming G-7 meeting,'' said
Hans-Guenter Redeker, the London-based global head of currency strategy
at BNP Paribas SA, France's biggest bank. ``It's showing that some sort
of coordination may be taking place.''