AFP: Dollar rises against dollar, dips against yen
LONDON (AFP) — The dollar rose against the euro on Friday but fell versus the yen after the Bank of Japan said it was cutting its key interest rate by a smaller-than-expected 20 basis points to 0.3 percent.
In morning trading here, the euro slid to 1.2752 dollars from 1.2913 late in New York on Thursday.
Against the Japanese currency, the greenback dipped to 97.02 yen, from 98.76.
The Bank of Japan (BoJ) cut its super-low interest rates on Friday for the first time in seven years as central banks worldwide step up the fight against the worst financial crisis in decades.
The US Federal Reserve had slashed its key interest rate by a half-point on Wednesday to 1.0 percent and signalled that more rate cuts were likely in a bid to ward off a recession.
"It is not only the United States that is sliding into recession. The Japanese economy is not far behind," said Calyon analyst Mitul Kotecha.
"The yen remains driven more by risk aversion rather than rate policy but firmed following the (BoJ) decision."
As the week draws to a close, markets were also shifting attention to Europe where the European Central Bank and the Bank of England are expected to slash their respective interest rates next week.
Late last week, the Japanese currency soared to 13-year highs of nearly 90 yen to the dollar on fears of global recession which led investors to seek refuge.
The BoJ monetary policy board was evenly split on whether to lower interest rates, so the final decision was taken by governor Masaaki Shirakawa.
Tokyo's stock market quickly resumed its fall after the rate call, with the benchmark Nikkei index plummeting more than five percent by the close.
"The smaller-than-expected rate cut showed a limit for what the BoJ can do," said Naomi Fink, a dealer at the Bank of Tokyo-Mitsubishi UFJ. "The split decision was also a factor for the resumption of buying the yen."
But Saburo Matsumoto, chief forex strategist with Sumitomo Trust Bank, said: "It was true that the Bank of Japan took action. The risk that the yen will surge to the 90 yen level is still limited."
Meanwhile, data showed Thursday that the US economy contracted by a less-than-expected annualized rate of 0.3 percent in the third quarter amid global financial turmoil.
In London morning trading on Friday, the euro changed hands at 1.2752 dollars against 1.2913 late Thursday, at 123.73 yen (127.22), 0.7882 pounds (0.7856) and 1.4648 Swiss francs (1.4726).
The dollar stood at 97.02 yen (98.76) and 1.1486 Swiss francs (1.1430).
The pound was at 1.6241 dollars (1.6399).
On the London Bullion Market, the price of gold fell to 726.64 dollars an ounce from 755.25 dollars late on Thursday.
