The yen and the dollar rose after the Federal Reserve declined to provide more information about buying Treasuries to help boost the economy, fueling speculation investors will favor the currencies as a refuge. The euro slid the most in a week against the dollar after European Central Bank President Jean-Claude Trichet signaled yesterday policy makers won’t lower interest rates before March, stoking concern the region’s slowdown will be prolonged. New Zealand’s dollar declined after the country’s central bank cut the official cash rate more than most forecast. Russia’s ruble had its biggest two-day drop in a decade against the dollar. “The Fed was a bit more cautious than people expected and the dollar rose accordingly,” said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp., the world’s biggest custodian of financial assets. “The world is going to have to get used to a stronger yen.” The yen strengthened to 117.51 per euro as of 6:30 a.m. in New York, from 118.88 yesterday. The euro lost as much as 1.1 percent versus the dollar, the most since Jan. 23, and was at $1.3114, from $1.3166 yesterday. The yen was at 89.63 per dollar, from 90.26 yesterday, when it weakened to a one-week low of 90.75. The Japanese currency may trade between 85 and 90 per dollar and about 115 to the euro this quarter, Mellor said. New Zealand’s dollar traded at 51.93 U.S. cents, from 52.43 cents yesterday. The kiwi, as the currency is known, touched 51.28 cents, the lowest level since December 2002 and declined against all the 16 most-active currencies tracked by Bloomberg. The Reserve Bank of New Zealand cut its benchmark interest rate by 1.5 percentage points today. Fed Policy The Fed kept its target rate for overnight loans between banks in a range of zero to 0.25 percent at a meeting yesterday. Standard & Poor’s 500 Index futures fell 1.3 percent and Europe’s Dow Jones Stoxx 600 Index lost 1.3 percent. The cost of protecting the region’s corporate bonds from default rose. “We continue to expect a return to risk aversion to lead to a stronger dollar and yen,” analysts led by David Woo of Barclays Plc wrote in a research note today. “We maintain our view that it will be difficult for equities for rally while bad assets remain on banks’ balance sheets.” The Fed last cut its target lending rate Dec. 16 and shifted its focus to the amount and type of debt it buys, seeking to revive credit markets after financial institutions worldwide posted $1 trillion in losses on mortgage-related securities since the start of 2007. The central bank began this month a $500 billion program to buy Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities, pushing down the yields on mortgage bonds relative to Treasuries. Trichet on Rates ECB President Trichet said yesterday in an interview on Bloomberg Television in Davos, Switzerland, that “very, very low” interest rates “have some inconveniences.” He reiterated that the ECB’s next important meeting is in March, signaling policy makers won’t cut interest rates next week. The central bank lowered its benchmark rate on Jan. 15 by a half-percentage point to 2 percent, matching a record low. The euro stayed lower after the European Commission said its index of executive and consumer sentiment declined to a record low in January. The index fell to 68.9, from a revised 70.4 in December, the lowest level since it was started in 1985. The odds that the ECB will lower its main refinancing rate by a quarter-percentage point from 2 percent at its Feb. 5 meeting were 69 percent today, according to a Credit Suisse Group index based on overnight swaps. The chances were 68 percent yesterday. Currency ‘Respite’ “The recent resilience and the associated strength in a number of the Group of 10 currencies reflects a respite more than anything else,” Societe Generale SA strategists led by Vincent Chaigneau in London wrote in a report today. Any gains for the euro are “unlikely to be sustained,” they wrote. The ruble depreciated 3 percent to 34.9458 per dollar, bringing its loss the past two days to 5.6 percent, the most since March 1999, as investors speculated the central bank will be forced to widen its target trading band. Bank Rossii drained about 35 percent of its foreign reserves defending the currency since mid-August. The Japanese yen may weaken against the U.S. dollar and eight more of the world’s most-traded currencies as riskier foreign-exchange trades revive, Citigroup Inc. analysts said, citing technical charts. The U.S. dollar looks to be forming a so-called double bottom, meaning any advance above 94.65 yen probably would be followed by a surge to as high as 102 yen, analysts led by New York-based Tom Fitzpatrick, Citigroup’s chief technical analyst, said in a report dated yesterday. A double bottom forms when a security makes two consecutive troughs of about the same depth, and indicates potential for a rebound.

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