Dollar falls below Y100 level

The dollar slumped through the psychological support level of Y100 for the first time in more than 12 years in early European trading on Thursday, adding to the litany of economic headaches facing Japan’s government.

The dollar fell to Y99.77 in Europe after earlier testing the Y100 level during Japan’s trading day. It last went below Y100 in September 1995.

The dollar was pummeled against other currencies as well. It traded at a record low of $1.5575 against the euro and another record trough of SFr1.0117 against the Swiss franc.

Concerns over the yen’s strength against the dollar and its potential effect on Japanese exporters’ profits drove the Tokyo Stock Exchange’s benchmark Nikkei 225 stock average down 3.3 per cent to 12,433.44, its lowest level in two-and-a-half years.

The yen’s strength comes at a difficult time for Japan’s government which is also grappling with a possible leadership vacuum at the central bank.

Many economists are already expecting economic growth to slow in Japan from the first quarter of 2008 as the economy starts feeling the pain of a slowdown in the US, its second-largest trading partner.

The effect of a stronger yen, which makes exporters’ prices less competitive, is an additional bind for Japan’s economy where consumer spending growth is lacklustre and surging oil and food prices are weighing on consumer confidence.

Story from Financial Times