The yen rose to the strongest level versus the euro since May 2002 and
traded near a 13-year high against the dollar as global economic
turmoil encouraged investors to sell higher-yielding assets funded in
Japan.
French Finance Minister Christine Lagarde said in an interview with
Bloomberg News that the Group of Seven doesn't plan to intervene to
weaken the yen after the G-7 said in an unscheduled statement that
excessive movements in the currency may threaten financial stability.
The pound slid after an industry report showed U.K. house prices
slumped.
``It's a combination of unwinding carry positions and money going home
to Japan and the U.S.,'' said Tom Fitzpatrick, global head of currency
strategy at Citigroup Global Markets Inc. in New York. ``It's not an
environment where one should be looking for return on capital, but for
return of capital.''
In the past month, Japan's currency has increased 14 percent against
the dollar, 33 percent versus the euro, 55 percent versus the
Australian dollar and 44 percent against the New Zealand dollar on
speculation investors will unwind carry trades, in which they get loans
in countries with low borrowing costs and seek higher returns
elsewhere.
Stocks in Asia and Europe tumbled as investors bet the credit crisis
and mounting bank losses will lead to a global recession. Hong Kong's
Hang Seng Index sank as much as 15 percent, and trading was halted in
the Philippines and Thailand. The Standard & Poor's 500 Index
gained 0.1 percent.
The euro stayed lower against the dollar and the yen after a survey by
the Ifo institute showed business confidence in Germany, the largest of
the 15 economies sharing the currency, declined to the lowest level in
more than five years in October. European Central Bank President
Jean-Claude Trichet said policy makers may cut interest rates at their
Nov. 6 meeting.
The dollar is reasserting its status as the world's reserve currency as
investors seek a haven from plunging emerging-market stocks and bonds.
The ICE futures exchange's Dollar Index, which tracks the greenback
against the currencies of six major trading partners, soared to the
highest in more than two years. The sell-off in emerging markets may
``set the stage'' for bigger gains, according to Barclays Capital.