BackDollar hits 18-month low against yen on stocks slump
Dollar hits 18-month low against yen on stocks slump
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Tokyo: The dollar briefly tumbled below the 110-yen level for the first time in about 18 months on 12 November 2007, as jitters over the US subprime mortgage crisis led investors to search for safe havens, dealers said.
The greenback fell to as low as 109.85 yen in Tokyo afternoon trade, dropping below the psychologically important 110 level for the first time since May 2006 as speculators exited risky trades.
In late Tokyo trade, it stood at 110.30 yen, down from 110.66 in New York on 9 November, when the greenback had already tumbled against the Japanese unit.
“The dollar’s fall was triggered by a slide in global stocks and the inability of investors to assess further losses at major US and European banks" due to the subprime crisis, said Hachijuni Bank strategist Yoshifumi Suzuki.
“Traders have been reducing risk by buying back the yen," he added.
The yen was also up against high-yielding currencies such as the Australian and New Zealand dollars, as traders pared back so-called carry trades that play on interest rate differentials across regions.
The euro was also weaker, dropping to 1.4629 dollars in late Tokyo trade from 1.4677 in New York, and to 161.39 yen from 162.43.
Markets have been spooked by a steady flow of bad news, including losses at major banks from investments in securities backed by subprime mortgages extended to homebuyers with poor credit histories.
Growing jitters about the impact of the subprime loan crisis have increased speculation about another US interest rate cut in December, dealers said.
“The biggest fear is a US recession," said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank, who believes that recession may be unavoidable.
“More bad news from the subprime market is going to come out, and we have not seen the worst yet. By the year-end, hopes that the US economic outlook remains bright will go up in smoke," he said.
The Federal Reserve has cut rates twice consecutively since troubles in the US subprime mortgage sector roiled global markets in August. Many expect another quarter-point cut to 4.25% next month.
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