The dollar dropped to a record low against the yen late Wednesday as Japan's nuclear crisis deepened. Debt woes in Europe, tension in the Middle East and weak economic reports at home also weighed on the greenback.
The dollar plunged to 76.53 Japanese yen late Wednesday, falling far below the previous all-time low of 79.75 yen set April 1995. Leaks of radioactivity from a stricken Japanese nuclear plant have deepened the Asian country's woes following last week's massive earthquake and tsunami.
The dollar was worth 80.83 yen late Tuesday.
Many analysts have said they expected the Bank of Japan to try to weaken the yen if the dollar dropped below 80 yen. A strong yen hurts the Asian country's exporters, potentially deepening any hit to the economy from the earthquake and lingering nuclear crisis.
"It's safe to assume that no one in Japan wants to see dollar-yen trade much below 80 and certainly not below 79.75," said David Gilmore of Foreign Exchange Analytics in Essex, Conn.
Despite the devastation and intensifying nuclear threat in Japan, the yen has been rising. That's in part because the yen is a traditional safe-haven currency, benefiting during periods of international turmoil. Also, market trackers expect Japanese investors to close down overseas bets and bring their money home, which has been driving the yen higher.
Japan, acting alone, intervened to weaken the yen in September 2010. This time efforts to curb the yen's rise may be different.
Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, believes that a reported call for a meeting of finance ministers of the Group of 7 major economies could result in an international move to stabilize the yen. On Wednesday, French Finance Minister Christine Lagarde had called for a meeting of G-7 finance ministers and central bankers to determine how to "respond on the financial level" to the crisis in Japan and its effect on world markets.
"It's clear that the Bank of Japan stands ready and able to intervene in the market with the blessing of the G-7 and the international community," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon Corp. in New York.
Meanwhile, the euro dropped to $1.3901 from $1.4000 and the British pound fell to $1.6023 from $1.6092 amid tensions from elsewhere around the globe.
Portugal raised $1.4 billion in a debt auction Wednesday, but the indebted country had to pay higher interest rates to investors a day after Moody's downgraded its credit rating, refocusing some attention on Europe's debt crisis.
In the Middle East, soldiers and police cracked down on hundreds of protesters in Bahrain, a neighbor of Saudi Arabia, the world's biggest producer of oil. If upheaval spills into Saudi Arabia, oil production could be greatly affected. A Saudi-led force is already in Bahrain, and analysts fear tensions between Saudi Arabia and its Shiite rival Iran, another major oil producer. Iranian President Mahmoud Ahmadinejad on Wednesday denounced the Bahraini government's moves and the Saudi-led forces in Bahrain.
There were also negative signals for the U.S. economy Wednesday in government reports.
The Labor Department said producer prices in the U.S. posted the steepest rise last month since June 2009 because of climbing food and energy prices. But apart from those, inflation remained muted in February, suggesting the Federal Reserve isn't likely to raise interest rates any time soon.
Higher rates, used to fight inflation, tend to support a currency.
Another government report on housing indicated that the real estate market was a long way from a recovery, weighing on the broader economy. Home construction dropped 22.5 percent in February from January to a seasonally adjusted 479,000 homes last month. That's the lowest level since April 2009 and the second-lowest on record. Permits to start new projects fell to the lowest level on records going back to 1960.
"With core (producer prices) inflation still low and the economic recovery constrained by the continued weakness in housing, the Fed is not going to respond by tightening policy," wrote Paul Ashworth, an economist with research firm Capital Economics, in a research note.
The Fed on Tuesday remained committed to seeing its $600 billion bond-buying program through June, which is meant to lower long-term interest rates, and reiterated that it would hold the key U.S. interest rate near zero for an "extended period."
In other trading Wednesday, the dollar rose to 99.17 Canadian cents from 98.24 Canadian cents but fell to 0.9044 Swiss franc from 0.9175 Swiss franc, after setting a new record low of 0.9070 Swiss franc earlier in the day.
The franc, like the dollar and the yen, are considered by traders to be safe-haven currencies, and tend to rise during periods of geopolitical tension.