By Stanley White Dec. 12 (Bloomberg) -- The dollar slumped below 90 yen for the first time in 13 years and declined against the euro after the U.S. Senate rejected a $14 billion bailout plan for the nation’s automakers. The dollar headed for its biggest weekly loss against the euro since the 15-nation currency’s 1999 debut and a sixth weekly decline versus the yen on speculation General Motors Corp. and Chrysler LLC will run out of cash early next year. The yen and the Swiss franc rose on speculation investors will seek the relative safety of the two countries’ assets. “The dollar is dropping like a rock,” said Masahiro Sato, joint general manager of the treasury division in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest publicly listed lender. “This is a big blow to confidence in the U.S. economy. Bankruptcy protection for U.S. automakers may be the only option left.” The U.S. currency weakened to 88.53 yen, the lowest since Aug. 2, 1995, before trading at 89.39 yen as of 2:06 p.m. in Tokyo from 91.45 yen late yesterday in New York. It declined to $1.3406 versus the euro, the lowest since Oct. 20, and traded at $1.3371 per euro from $1.3352 yesterday. The euro fell to 119.99 yen from 122.09 yen. The euro also declined to 1.5765 Swiss francs from 1.5812. The dollar dropped 4.9 percent this week against the euro, and 3.8 percent versus the yen. The dollar may weaken to 85 yen today, Sato said. Currency Intervention Japanese officials will take appropriate action in the currency market, Vice Finance Minister for International Affairs Naoyuki Shinohara told reporters in Tokyo today. He declined to comment on whether officials will intervene. Foreign exchange moves have been abnormal, he said. Policy makers intervene by arranging the purchase and sale of currencies. The MSCI Asia Pacific Index of regional shares slumped 3.5 percent and Standard & Poor’s 500 Index futures tumbled 4.7 percent after the bailout vote failed to pass in the Senate. Treasuries rose, pushing two-year note yields to a record low of 0.67 percent. The Senate rejected the legislation late on Dec. 11 in Washington after negotiations on an alternate plan collapsed. The bill passed the House on Dec. 10. “It’s over with,” Majority Leader Harry Reid said on the Senate floor. “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.” Unresolved Issues Connecticut Democrat Christopher Dodd, who helped lead the negotiations, said the final unresolved issue was a Republican demand that unionized autoworkers accept a reduction in wages next year, rather than later, to match those of U.S. autoworkers who work for foreign-owned companies, such as Toyota Motor Corp. GM and Chrysler LLC are racing against the clock as they need federal aid to keep from running out of cash early in 2009. Pressure is mounting on GM as a small number of parts makers ask for payments in advance, people familiar with the matter said. “There are no incentives to buy the dollar right now,” said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. in Tokyo, a unit of Japan’s largest brokerage. “U.S. politicians can’t even agree on stopgap measures for the auto industry.” The dollar may fall to $1.38 per euro and 88 yen this month, Amikura said. To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net.

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