The dollar surged against the Japanese yen and the euro Thursday. Japan's central bank stepped into currency markets to curb its currency's rise, while Europe's destabilizing debt crisis spooked investors.
The yen has flirted with post-World War II lows this week. In late trading Thursday, the dollar shot up nearly 3 percent against the yen, one of its biggest single-day leaps this year. The dollar earlier rose as high as 80.23 yen, its highest point in nearly a month, before falling back to 79.02 yen. The dollar was worth 76.95 yen late Wednesday.
Japan's move, its third intervention in foreign exchange markets since September 2010, came a day after Switzerland's central bank tried to curb the Swiss franc's rise. The franc had hit record highs against the dollar and euro on Tuesday. The yen and franc, traditional safe-haven currencies, have soared in recent months as debt crises and fears of slowing growth hit the U.S. and Europe.
The yen also retreated against the euro Thursday, while the dollar and the Swiss franc climbed higher against the European currency used by 17 countries, on fears of a deepening European debt crisis. The euro tumbled to $1.4134 from $1.4317.
The European Central Bank indicated Thursday that it had restarted a program to buy bonds of its most distressed member countries in an effort to calm markets. Borrowing costs have jumped for Italy and Spain, despite an agreement by European leaders last month to overhaul the currency union's crisis strategy. They had agreed to a second massive bailout for Greece and far-reaching new powers for their rescue fund.
The deal has failed to reassure investors, analysts say. The region's bailout fund isn't big enough to help Italy and Spain, said Brown Brothers Harriman analyst Lena Komileva, and the July agreement hasn't been ratified yet by Europe's national governments.
If Italy and Spain get locked out of bond markets because borrowing costs rise too high, the current bailout fund would not be big enough to rescue them. Ireland, Portugal and Greece all accepted emergency aid packages because of unsustainably high borrowing costs.
In other trading Thursday, the British pound dropped to $1.6287 from $1.6419. The dollar fell to 0.7677 Swiss franc from 0.7685 franc and rose to 97.88 Canadian cents from 96.26.