LONDON (AFP) --
The yen marched higher against the dollar on Friday, snubbing an interest rate cut by the Bank of Japan aimed at fighting recession in the world's second largest economy, analysts said.
In late morning trading in London, the US currency fell to 88.74 yen, down from 89.48 yen in New York late on Thursday.
The euro sank to 1.4089 dollars, which was down from 1.4268 dollars, pulled down by poor data in Germany, the biggest economy in the eurozone.
The BoJ said it was cutting the benchmark rate of borrowing from 0.3 percent to 0.1 percent, following a wave of global interest rate cuts.
Japanese leaders had supported a rate cut, partly in hopes that it would bring down the yen, which soared to a 13-year high against the greenback this week. But dealers said the cut was largely symbolic as rates were already low.
The yen briefly went down after the decision but the earlier market trends quickly returned, said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust and Banking Corp.
"Heading into next week, I can't see a big change in the trend of a stronger yen against the dollar," he said.
Traders said that with rates so low, the market was now focused instead on the two countries' economic outlook, prompting them to sell dollars.
"The dollar won't be able to rise far above 90 yen because many players are still interested in selling the dollar there," Yuji Saito, head of FX Group at Societe Generale, told Dow Jones Newswires.
This week, the dollar has taken a beating from both the yen and the euro after the US Federal Reserve slashed interest rates to a range of zero to 0.25 percent in a bid to reverse the dire economic situation.
The euro reached 1.4719 dollars on Thursday, which was the highest point since September 25.
But the single currency fell Friday after news that German producer prices fell by 1.5 percent in November from the level the previous month, the biggest monthly drop since statistics began to be compiled in 1949.
The sharp decrease -- largely the result of lower energy prices -- was much bigger than expected by analysts polled by Dow Jones Newswires, who had forecast a fall of 0.8 percent.
With the Bank of Japan decision out of the way, dealers said the market's attention will go back to monitoring whether the United States will step in to save the ailing Big Three automakers.
The British pound clawed back some ground against the euro after tumbling to a record low of 1.0463 euros on Thursday on expectations of more steep interest rate cuts from the Bank of England.
In trading in London on Friday, the euro changed hands at 1.4089 dollars against 1.4268 dollars late on Thursday, at 125.20 yen (127.70), 0.9368 pounds (0.9502) and 1.5431 Swiss francs (1.5436).
The dollar stood at 88.74 yen (89.48) and 1.0940 Swiss francs (1.0817).
The pound was at 1.5058 dollars (1.5016).
On the London Bullion Market, the price of gold fell to 838.92 dollars an ounce from 855.25 dollars late on Thursday.
