Dollar at 15-year low versus yen

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 midday trading in New York, the dollar tumbled to 83.05
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 jumped to a month high of $1.3018 from $1.2867 late
Monday, while the British pound gained to $1.5556 from $1.5408. The dollar fell to 1.0228 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.   

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.