The yen plunged down, hitting its worst mark in almost four years versus the euro, as the Federal Reserve surprisingly continue a financial policy that triggers investors to borrow in low-interest-rate currencies to purchase higher-yielding assets. Japan's currency backslide versus all 16 of its major counterparts after a central-bank policy maker said pressure may mount to expand stimulus. The dollar plays back and forth versus the euro after declining to a seven-month low as Fed policy makers continued monthly bond buys at $85 billion. Malaysia’s ringgit soared the most since 1998 and India's rupee bolstered. The pound pullback after U.K. retail sales surprisingly drop. Stocks Surge The MSCI Asia Pacific Index of shares increased 1.7 percent, while the Stoxx Europe 600 Index gained 0.6 percent. The Standard & Poor’s 500 Index backslide 0.2 percent. Risk Rally “Yesterday’s initial reaction was to clear out long dollar-yen positions, now we’re returning to the typical risk-on scenario,” said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “The currencies that correspond to carry trades, the Aussie, Kiwi are doing well, while the yen is doing badly.” Pound Declines Sterling weakened from almost an eight-month high against the dollar after data showed U.K. retail sales including fuel declined 0.9 percent from July. The median forecast of 20 economists in a Bloomberg survey was for a 0.4 percent gain. Week’s Results The dollar declined 1.8 percent in the past week, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen lost 1.9 percent and the euro gained 0.2 percent. Trading in over-the-counter foreign-exchange options totaled $32 billion, from $24 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $6.6 billion, the largest share of trades at 21 percent. Options on the euro-dollar rate totaled $6 billion, or 19 percent. Dollar-yen options trading was 35 percent more than the average for the past five Thursdays at a similar time in the day, according to Bloomberg analysis. Euro-dollar options trading was 228 percent more than average.
