The yen fell against higher-yielding currencies after
governments in the U.S., Europe and Australia pledged to support banks,
encouraging investors to increase holdings of euros, British pounds and
Australian dollars.
German investor confidence dropped for the first time in three
months in October, to near a record low, as the global credit crisis
threatened to tip Europe into a recession.
The ZEW Center for European Economic Research said its index of
investor and analyst expectations slumped to minus 63 from minus 41.1
in September. The gauge reached an all-time low of minus 63.9 in July.
Economists expected a decline to minus 51.1.
``The financial-market turmoil is the main cause for the drop in the
index,'' Sandra Schmidt, an economist at ZEW, said in an interview on
Bloomberg Television. ``There's concern that it will spread to the real
economy.''
Europe's economy may be cushioned by falling oil prices, the euro's retreat and lower interest rates.
U.K. inflation quickened to the fastest pace in at least 11
years in September, squeezing consumers with higher living costs as the
financial market crisis curbed the availability of credit.
Prices rose 5.2 percent from a year earlier, the most since records
began in 1997, the Office for National Statistics said in London today.
The median forecast of economists was 5 percent. Inflation has now
exceeded the Bank of England's 2 percent target for a year.
``The weakness in the economy will be more than enough to bring
inflation to target,'' said Nick Kounis, an economist at Fortis in
Amsterdam and a former U.K. Treasury official. ``Today's reading isn't
a barrier to further rate cuts. The bank is more worried about
inflation undershooting the target now.''
The pound was little changed at $1.7502 after the report. Stocks
recovered for a second day after the U.K. government bailed out banks
including HBOS Plc and similar measures were adopted in Europe and the
U.S