Yen Surges to 2-1/2-year High vs Dollar


The yen rose to its highest level against the dollar since June 2005 as investors exited riskier assets after soft U.S. retail sales data added to fears the economy could be headed for recession.

Jitters about growth prompted some investors to reduce risky positions and unwind carry trades, in which they borrow in a low-yielding currency such as the yen to buy relatively high-yielding currencies such as the Australian dollar.

The dollar was down 1 percent to 107.08 yen, after dropping as low as 106.61, according to Reuters data. The Australian dollar tumbled 1.3 percent to US$0.8880, well off the day's high of US$0.9018.

Concerns that flagging spending by U.S. consumers would spread the slowdown abroad also weighed on other currencies.

The euro fell to a four-month low against the yen of 158.54 before recovering some ground to trade at 158.93, down 1.2 percent. Heavy selling against the yen pushed the euro down against the U.S. dollar to $1.4845, off the day's high of $1.4922.

The yen gained ground across the board shortly after a report showed U.S. retail sales fell 0.4 percent in December and spending last year was the lowest in five years.

A crisis in the U.S. financial sector has been weighing on the rest of the economy and the dollar. Its also boosted currencies such as the Swiss franc and the yen that were previously sold rather indiscriminately because of their low yields.


TradingEconomics.com, Reuters
1/15/2008 12:59:50 PM