US dollar falls to 13-year low against yen

US dollar falls to 13-year low against yen
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First Published: Thu, Dec 18 2008. 10 23 AM IST
Updated: Thu, Dec 18 2008. 10 23 AM IST
AFP
Tokyo: The US dollar on Thursday wallowed at a 13-year low against the Japanese yen as speculation grew that the Bank of Japan (BoJ) may cut interest rates to tame the yen’s surge.
The greenback currency has taken a beating against both the yen and the euro after the US Federal Reserve cut interest rates this week to virtually zero in a bid to reverse the dire economic situation.
The dollar seesawed against the yen, falling to 87.16yen in Tokyo on Thursday’s morning trade before rebounding to 87.42yen, still down from 87.95yen late Wednesday in New York.
The euro rose to US $1.4419 from 1.4404, hovering near a level last seen at the end of September. The single European currency was flat at 126.02yen.
Nearly two-thirds of market players are expecting the Bank of Japan to slash rates from the current 0.3% to a range of 0 to 0.1% at a two-day meeting opening later Thursday, dealers said.
The meeting comes after a round of bigger-than-expected cuts by central banks around the world on Wednesday from Europe and the Middle East to Hong Kong in the wake of the Federal Reserve’s move.
“If the BoJ does not lower rates (on Friday) it will be a catastrophe. While a rate cut will not bring down the yen that much, the impact will be greater if it fails to do anything,” said Societe Generale’s forex head Yuji Saito.
“Since other central banks have made cuts that surpassed market expectations, Japan can’t be the only one standing doing nothing,” he added.
Dealers predict that the Bank of Japan is also likely to announce prospects for quantitative easing, which means expanding the money supply, in tandem with a similar move by the Fed in order to drive down the yen’s value.
The Bank of Japan may also unveil fresh efforts to shore up the economy including buying commercial paper in an attempt to unlock a persistent liquidity crunch, dealers added.
Japanese officials have flirted with the idea of intervening in currency markets, but traders doubted they would take action unless the yen appreciates suddenly.
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First Published: Thu, Dec 18 2008. 10 23 AM IST
More Topics: Money Matters | Currency |