The yen rose the most against the euro and the dollar in two weeks as Treasury Secretary Henry Paulson's plan to divert bailout money from banks to consumers prompted investors to sell higher-yielding assets.
``The markets are probably ill at ease with the concept that TARP funds, which were targeted for financial-sector stabilization, are now getting pushed away from that purpose by the political process,'' said Robert Blake, a senior currency strategist in Boston at State Street Global Markets LLC, which has $15.3 trillion in assets under custody.
Paulson plans to use the second half of the $700 billion Troubled Asset Relief Program, known as TARP, to help relieve pressure on consumer credit, scrapping an effort to buy devalued mortgage assets. The Treasury and the Federal Reserve are exploring a new ``facility'' to aid the market for securities backed by assets, Paulson said in a speech in Washington.
U.S. stocks declined for a third day as oil's slide to a 20-month low dimmed the earnings outlook for commodity producers. The Standard & Poor's 500 Index fell 3.2 percent, extending its decline on Paulson's comments. Crude oil for December delivery fell $2.82 to $56.51 a barrel in New York.
The pound fell to a record low against the euro for a third day after the central bank said the British economy will shrink through most of next year as a result of the global credit freeze. The dollar rose to a two-week high against the currencies of six trading partners on increased demand for the safety of U.S. assets.
Sterling dropped as much as 3.1 percent to the record low of 84.05 pence per euro after Bank of England Governor Mervyn King signaled policy makers aren't done cutting rates. The pound decreased as much as 3.2 percent to $1.4898, the lowest level since June 2002.