The yen declined against the euro and dollar as U.S. stock-index
futures rose, prompting investors to curb sales of higher-yielding
assets funded in Japan.
The yen reversed gains from a three-year low against the euro as
futures on the Standard & Poor's 500 Index advanced following its
biggest plunge since the 1987 stock-market crash. The dollar rose
toward its strongest level in more than a year versus the euro on
speculation turmoil in financial markets, sparked by the global credit
crisis, will encourage investors to buy U.S. Treasuries.
``The yen's very closely following global equities,'' said Lee Hardman,
a London-based currency strategist for Bank of Tokyo-Mitsubishi. ``The
moves we've seen in the yen over the last month have been extreme and
in the near term there is a potential for the currency to weaken.''
The Japanese currency fell against the euro as S&P 500 futures
expiring in December added 0.5 percent. The yen weakened on speculation
that investors will slow carry-trade reversals.
A carry trade is a strategy in which an investor obtains funds in a
country with low borrowing costs and buys assets where returns are
higher.
``People are buying safe-haven assets such as Treasuries because of
fears over the financial-markets turmoil,'' said Lee Wai Tuck, a
currency strategist at Forecast Pte Ltd. in Singapore. ``It's positive
for the dollar.''
Foreign investors increased their purchases of U.S. assets in August to
$30 billion, from $6.1 billion in July, according to survey of
economists. The Treasury Department will release the data at 1400 GMT
in Washington.