Dollar rebounds against yen

The yen slid against its major counterparts and dropped the most in four months versus the dollar as US President Barack Obama and congressional leaders agreed on a plan to prevent a default. The Swiss franc fell from a record against the dollar as gains in stocks boosted investor appetite for higher-yielding assets. The New Zealand dollar reached its strongest ever on improved prospects for the nation's exports after data showed faster-than-estimated manufacturing growth in China. The euro fell against most of its peers before Spain sells bonds this week amid concern Europe's debt crisis will linger. "There's a relief rally that has taken some of the steam off the yen and the franc," said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. "At the end of last week it was getting ever more pressing in terms of time horizon and the market was getting less sanguine about the prospects of a deal." The yen slid 0.9 per cent to 77.41 against the greenback in London from 76.76 on July 29 in New York, a record low for a closing level. Japan's currency slipped as much as 1.7 per cent yesterday, the most since April 1. The franc retreated 0.8 per cent to 79.19 centimes per dollar. It climbed last week to 78.51, the strongest on record. The US currency was little changed at $1.4394 per euro, from $1.4398 last week. Article continues below Debt agreement The 17-nation euro added 0.8 per cent to move to 1.1397 against the Swiss franc after reaching an all-time low of 1.1272 francs. The common currency advanced 0.8 per cent to 111.47 yen. The New Zealand dollar, known as the kiwi, reached 88.44 US cents, the most since it was freely floated in 1985, before buying 88 cents from 87.93 cents last week. Obama said from the White House that leaders of both parties in the US House and Senate had approved an agreement to raise the nation's debt ceiling by $2.1 trillion (Dh7.7 trillion) and cut the federal deficit by as much as $2.5 trillion over a decade. Shortly before Obama spoke, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell took to the Senate floor to endorse the accord. Treasury Secretary Timothy F. Geithner has said the US will run out of options to prevent a default by tomorrow if the debt limit isn't increased. Standard and Poor's, which has rated the US AAA since 1941, said on July 14 that the chance of a downgrade is 50 per cent in the next three months and it may cut the rating as soon as this month if there isn't a "credible" plan to reduce the nation's deficit. China's manufacturing The yen snapped a two-day advance against the dollar as the MSCI Asia Pacific Index of regional shares climbed 1.3 per cent. The Stoxx Europe 600 Index gained 0.7 per cent and Standard and Poor's 500 Index futures rose 0.8 per cent. The Purchasing Managers' Index for China's manufacturing was at 50.7 in July, compared with 50.9 in June, the China Federation of Logistics and Purchasing said in a statement yesterday. That was more than every forecast in a Bloomberg News survey of 13 economists. The yen also weakened amid speculation Japan's government and the central bank will take steps to halt gains in the currency that threaten the nation's export-led recovery. The yen remains 1.8 per cent from its postwar record of 76.25 per dollar reached on March 17. Finance Minister Yoshihiko Noda yesterday said he's watching currency markets closely and that recent movements haven't reflected Japan's economic fundamentals. The Bank of Japan is prepared to "proactively" take policy action should the yen's advance threaten economic growth, BOJ board member Hidetoshi Kamezaki said on July 27. "The rising pressure on the yen has yet to ease," said Tatsushi Shikano, a senior economist in Tokyo, who expected the government or the BOJ to take steps" should the yen resume an appreciation trend.