Dollar falls to 15-year low vs. yen after key election; euro surges to month high

Dollar at 15-year low vs yen; tumbles against euro

NEW YORK — The dollar staggered Tuesday, hitting a one-month low against the euro and dropping to a new 15-year low versus the yen after a key election made Japanese intervention to weaken its currency less likely.

The dollar also fell below one Swiss franc, which investors are using as a safe-haven currency. Both the yen and Swiss franc have surged against the dollar this summer after a string of weak data suggested that U.S. growth would slow sharply in the second half of the year.

Tuesday’s moves were “a straight dollar sell-off,” said Brian Dolan, the chief currency strategist at Forex.com. Analysts struggled to pin down reasons for Tuesday’s broad dollar weakness.

Dolan suggested worries about China buying fewer dollars as it allows its yuan to rise in value, while David Gilmore of Foreign Exchange Analytics credited the dollar drop to market speculation that the Federal Reserve was becoming more willing to start buying Treasurys and other assets this year to try to bolster the U.S. economy.

That would likely drive U.S. interest rates even lower, which would make some investments bought in dollars less appealing for investors.

In late afternoon trading in New York, the dollar tumbled to 83.07 Japanese yen from 83.63 yen. It had earlier bottomed at 82.93 yen, the first time it has fallen below 83 yen since May 1995. The dollar broke under 84 yen for the first time since 1995 last month and has been hitting fresh 15-year lows since then.

Japanese Prime Minister Naoto Kan won a party election, beating challenger Ichiro Ozawa, who analysts said was considered more likely to prod the central bank into selling the yen so that its value would decrease. The government last intervened in currency markets in 2004.

“Obviously the market’s not buying the threat of intervention,” said Joseph Trevisani, chief market analyst of FXSolutions.

The dollar also tumbled against the euro and other currencies after a better-than-expected report on retail sales, which tugged investors towards currencies perceived as more risky.

The euro rose above $1.30 for the first time since Aug. 11. It traded at $1.3019 in the late afternoon, up sharply from $1.2867 late Monday. The British pound gained to $1.5569 from $1.5408, while the dollar fell to 1.0248 Canadian dollars from 1.0271 Canadian dollars.

The dollar also slid as low as 0.9934 Swiss francs, falling below parity for the first time since December 2009. Parity means one dollar buys less than one Swiss franc. It’s rare for the dollar to be worth less than the Swiss currency. The dollar had traded below the franc for the first time in March 2008 and then for a few days in November and December 2009.

In late trading, the dollar was worth 0.9950 Swiss francs, down from 1.0085 francs Monday.

UBS analysts expect Switzerland’s central bank to raise the country’s interest rate by a quarter point on Thursday, even as the Swiss franc surges against the dollar and hovers near record highs versus the euro. A strengthening franc weighs on the profits of Switzerland’s exporters.

Higher interest rates tend to make a currency more attractive to investors searching for higher returns on their investments.

Also on Tuesday, China’s yuan hit a fresh high against the dollar for the third straight trading day as U.S. lawmakers prepare for hearings on Beijing’s foreign exchange policies on Wednesday and Thursday.

Treasury Secretary Timothy Geithner on Thursday will testify before a House committee on China’s exchange rate policy. U.S. manufacturers say that yuan is undervalued, making it harder for them to compete with Chinese exporters and making their goods more expensive in China.