The dollar slipped against the yen on Thursday as jitters over the global credit markets forced traders to unwind certain risky currency positions, benefiting the Japanese currency, reported The Associated Press. The dollar dropped to 113.11 yen in afternoon trading from 116.92 yen late Wednesday in New York as investors gave back yen carry trades, which involve selling off the low-yielding yen in favor of higher-yielding investments. «People aren't trading on fundamentals, that's not their primary motivation for currencies right now. People are making their decisions based on fear, preserving capital and reducing losses,» said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Conn. Concerns that the U.S. mortgage market fallout will lead to a global credit squeeze deepened Thursday after the nation's largest mortgage lender, Countrywide Financial Corp., said it had borrowed $11.5 billion from a group of 40 banks to fund loans. The news sent stocks plummeting worldwide for most of the day. However, by the close of trading in the U.S., the Dow Jones industrials ended with a loss of just 15, after plunging more than 340 points in afternoon trading. The mortgage market turmoil boosted the dollar against the euro and British pound, only weeks after those two currencies hit multiyear highs against the dollar. «The dollar strengthened against those because a lot of traders had weak dollar bets and that was the main story driving currencies until the mortgage credit story swallowed it,» Gilmore said. The 13-nation euro fell to $1.3405 in late afternoon trading in New York, down from $1.3460 late Wednesday in New York. The British pound dipped to $1.9792 from $1.9935 late Wednesday. An earlier report showing July inflation in the European Union easing to 1.9 percent also pressured the euro. The European Central Bank may be less likely to raise interest rates at its next meeting. The Bank of England and the ECB both left interest rates unchanged at 5.75 percent and 4 percent, respectively, at their meetings earlier this month. Last week, the Federal Reserve left its key interest unchanged at 5.25 percent. Higher interest rates, a weapon against inflation, can support a currency by offering investors better returns on investments denominated in it. In other New York trading, the dollar bought 1.2149 Swiss francs, down from 1.2190 late Wednesday, and 1.0773 Canadian dollars, down from 1.0777.
