The yen had its biggest decline against the euro in almost eight years
as a flurry of central bank interest-rate cuts helped arrest a slump in
stocks, bolstering demand for higher-yielding assets funded in Japan.
Japan's currency also tumbled versus the U.S., Australian and New
Zealand dollars as equities in Asia and Europe rebounded. The pound
dropped versus the euro on speculation more interest-rate cuts are
needed to avert an economic slump.
``The yen declines reflect greater stability in equity markets
following yesterday's rate moves,'' said Simon Derrick, chief currency
strategist at Bank of New York Mellon Corp. ``Movement on the yen is a
good bellwether of any of the mood in risk appetite.''
``People will be somewhat reluctant to buy the yen from here,'' said
Akio Shimizu, chief manager of foreign-exchange trading in Tokyo at
Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's largest
publicly traded bank. ``The yen's gains against many currencies are
starting to breach the comfort zone, so the G-7 may want to stabilize
the currency.''
The Federal Reserve reduced its target lending rate by a
half-percentage point to 1.5 percent yesterday, while the European
Central Bank and counterparts from the U.K., Canada, Sweden and
Switzerland also announced cuts. Central banks in China, Hong Kong and
Taiwan lowered their key rates and the Bank of Korea cut its benchmark
for the first time in four years.
``You would be looking to buy dollars,'' said Kathy Lien, director of
research at GFT Forex in New York, in a Bloomberg Television interview.
``Two to three months down the line the ECB will still be cutting
interest rates while the Fed won't. The ECB has a lot more room to cut
interest rates.''
EUR/USD reached $1.3785, before profit take pushed the pare down to $1.3670. Offers $1.3800/05. Bids $1.3660/50.