The yen rose against the dollar, headed for its biggest weekly gain in a decade, on speculation a global stock-market rout will prompt investors to pare holdings of higher-yielding assets funded with the Japanese currency.
The yen was on course for its largest weekly gain versus the euro as the Dow Jones Industrial Average and Nikkei 225 Stock Average both fell below 9,000 for the first time since 2003. Group of Seven finance ministers and central bankers meet today and tomorrow in Washington to discuss financial turmoil that has wiped more than $8 trillion off the value of global stocks this month and led to interest-rate cuts and bank bailouts in most of the member nations.
The yen has surged 28 percent versus the Australian dollar, 20 percent against New Zealand's currency and 11 percent against the euro this month as investors pared so-called carry trades, in which investors get funds in nations such as Japan that have low borrowing costs and buy assets where returns are higher. Japan's benchmark rate is 0.5 percent, compared with 6 percent in Australia and 7.5 percent in New Zealand.
The dollar's one-month 25-delta risk-reversal rate against the yen was minus 6.9625 percent today versus minus 6.4050 yesterday, signaling traders demand a greater premium for yen calls, which allow for purchases, over puts, which grant the right to sell.
G-7 finance ministers and central bankers will meet for two- days in Washington to discuss the financial crisis, which has already led to bank bailouts in most of the member nations.
EUR/USD having established session high on $1,3785, the pair by the end of session has decreased below a level $1,3600.
GBP/USD having reached a mark $1,7061, the pair has established a new five years' low.
USD/JPY having tested resistance in the field of Y101,50, the rate has decreased below mark Y100,00, but nevertheless on results of session could show insignificant growth (+48 point).
Friday's session sees an early close for US markets ahead of the Columbus Day holiday on Monday, though the late European session is dominated by central bank and finance minister appearances, given the G7 meetings in Washington.
European data for Friday starts at 0645GMT with France industrial production for August. This is followed at 0800GMT by Italian industrial production and at 1000GMT by the Eurozone August OECD lead indicator.