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NEW YORK : The dollar tumbled against the yen Thursday, but notched up gains against the euro and the British pound as investors unwound risky "carry trades" that had previously depressed the Japanese currency.
Analysts said the Japanese currency's fortunes had risen as some speculators unwound so-called carry trades, in which investors borrow currencies with low interest rates, such as the yen, to buy currencies that pay higher rates.
The dollar dipped to 113.86 yen, down sharply from 116.60 yen late Wednesday at 2100 GMT.
The euro meanwhile slipped to 1.3425 dollars, down from 1.3444 late Wednesday. The euro has lost over three percent of its value against the dollar since hitting a record high of 1.3852 dollars on July 24.
The pound meanwhile fell to 1.9827 dollars, compared with 1.9890 dollars a day earlier.
The high-risk investment strategy of carry trades, which had led to relentless selling of the yen earlier this year, is suddenly being shunned by investors who are rattled by losses on global stock markets tied to the US housing downturn.
"We are calling the end of the global currency carry trade, suggesting low yielding currency crosses such as Aussie dollar-yen, pound-yen and euro-yen will remain under pressure," said a forex strategist at French bank BNP Paribas.
Some analysts said the mortgage and credit jitters roiling US and world stock markets had helped support the dollar as it is perceived as a so-called "safe haven" currency in times of market turmoil.
"Everyone from hedge funds to Mrs. Watanabe has probably been shaken out," said Kathy Lien, a chief currency strategist at Forex Capital Markets, referring to the stock and financial market turmoil that has swept global markets this week.
"Flight to safety continues to send the dollar higher against every major currency with the exception of the Japanese yen, as more victims of the sub-prime and liquidity crisis surface," she said.
Rising home foreclosures have stressed the US mortgage sector and sparked credit concerns through the banking sector.
Hundreds of thousands of sub-prime loans were doled out during the US housing boom, which ended in early 2006, to borrowers with scant finances who are now struggling to repay mortgage loans.
In late New York trade, the dollar was quoted at 1.2165 Swiss francs, compared with 1.2187 late Wednesday.
- AFP/ir
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