The yen fell against the euro - BOJ cut interest rate.

By Stanley White

 

Dec. 19 (Bloomberg) -- The yen fell against the euro for a fifth day after the Bank of Japan lowered borrowing costs to 0.1 percent from 0.3 percent and said it will buy commercial paper to help unlock credit markets.

 

The yen weakened versus the South Korean won and British pound and was little changed against the dollar on speculation Japanese officials will intervene to stem its surge to a 13-year high. The dollar declined against the euro, headed for its biggest weekly loss since the 15-nation currency's 1999 debut, after the Federal Reserve introduced near-zero interest rates and said it would focus on buying debt, a policy known as quantitative easing.

 

"The BOJ has done what's necessary given the state of the global economy," 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. "The yen is weakening against the euro as monetary policy in Europe isn't as loose as in Japan."

 

The yen declined to 127.62 per euro as of 2:30 p.m. in Tokyo from 127.44 late yesterday in New York, when it reached a six- week low of 130.92. It traded at 89.42 versus the dollar after surging to 87.14 on Dec. 17, the highest level since September 1995. The dollar dropped to $1.4278 versus the euro from $1.4240. The yen may weaken to 130 per euro today, he said.

 

The yen has appreciated 25 percent against the dollar this year, the most since 1987, as more than $1 trillion of credit- market losses sparked a seizure in money markets and threw the global economy into a recession.

 

The BOJ also said it will raise monthly Japanese government bond purchases to 1.4 trillion yen ($15.6 billion) from 1.2 trillion yen.