Tokyo: The dollar slumped on Wednesday below 100 yen for the first time in six months, with investors flocking to the Japanese currency as a safe haven as global stocks suffered historic drops.
The yen is backed by the lowest interest rates among the world’s major economies, allowing investors to stock up in times of turbulence on global markets.
As Japan’s stock market posted one of its worst-ever falls, the dollar slipped below the key 100-yen point for the first time since 1 April.
It rebounded slightly afterwards to 100.15 after a low of 99.58. The yen had traded at 101.38 in New York late Tuesday.
“No one knows for certain now what they can rely on,” said Hironobu Hagi, deputy general manager at capital market division of Shinsei Bank.
“We’re seeing panic selling. Once players see a sign of selling, everybody tries to jump on the bandwagon,” he said.
He said he would not be surprised if the dollar fell as low as 95 yen.
“Yen buying is likely to continue for now as there are surely no elements to support the dollar,” Hagi said.
The stronger yen was also a major factor driving down stock prices as it makes Japanese exports -- a key driver of the faltering economy -- less competitive overseas.
The euro -- beset by growing concerns about the European financial sector in the global financial crisis -- also slipped against the dollar.
The single European currency was trading at 1.3566, down from 1.3599 in New York. The euro fell to 135.71 yen from 137.92.
Masatsugu Miyata, forex dealer at Hachijuni Bank, said that markets were unimpressed with efforts by the world’s central banks.
“They had already priced in moves by central banks and authorities, so markets were relatively unsurprised,” Miyata said.
“It’s rather that markets are turning the corner ahead of authorities and expecting them to take measures,” he said.
US Federal Reserve chairman Ben Bernanke in a speech on Tuesday hinted that the central bank would cut interest rates as the outlook for economic growth in the United States worsened.
Markets gave a muted response to news that the Fed opened its coffers to companies hit by the credit crunch with a new plan to buy up short-term debt critical for many corporate operations.
Markets were looking ahead to a Group of Seven meeting on Friday gathering central bank chiefs and other financial authorities, trying to see if they will draft further action to stem the crisis.
They were also watching developments in Europe, where governments have scrambled to save financial institutions from collapse.
Reports said French banks Caisse d’Epargne and Banque Populaire will hold talks on a possible merger, which would create France’s largest retail banking group.
Against regional Asian currencies, the dollar rose to 1,386.70 South Korean won from 1,329.90 on Tuesday, to 32.45 Taiwan dollars from 32.36 and to 47.55 Philippine pesos from 47.46.
It gained to 9,602 Indonesian rupiah from 9,595, to 34.56 Thai baht from 34.43 and to 1.4708 Singapore dollars from 1.4608.