NEW YORK ? The dollar surged against the Japanese yen Thursday after Japan's central bank stepped into currency markets in an effort to weaken the yen.
The yen has flirted with post-World War II lows this week.
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.
A strong currency is painful for Japan and Switzerland because it reduces the value of foreign earnings for exporters and makes their goods more expensive in overseas markets.
In morning trading Thursday, the dollar shot up nearly 3 percent against the yen, one of its biggest single-day leaps this year. The dollar rose as high as 80.23 yen, its highest point in nearly a month, before edging back to 79.09 yen. The dollar was worth 76.95 yen late Wednesday.
Japan sold yen and the central bank planned to expand programs to buy up assets such as government bonds in order to weaken the yen.
The U.S. currency also climbed against other key currencies Thursday. The euro tumbled to $1.4160 from $1.4317 after the head of the European Central Bank, Jean-Claude Trichet, wouldn't say whether the ECB was buying the distressed bonds of Italy and Spain. Investors have driven up borrowing costs for Italy and Spain, triggering fears that these large economies will need aid. Investors remain skittish even after European leaders agreed to overhaul Europe's bailout fund last month and approved a second round of Greece to keep it from default.
The ECB also kept its key interest rate at 1.5 percent, and Trichet used language that signaled a possible rate increase in the months ahead. But many analysts think the ECB will not lift rates because of the economic problems of so many of the euro bloc's 17 countries.
Higher rates tend to support the value of a currency. The dollar has dropped more than 5 percent this year against a group of six major currencies in part because of low interest rates in the U.S. and the extra steps the Federal Reserve has taken to drive rates still lower, like buying up Treasurys.
In other trading Thursday, the British pound dropped to $1.6343 from $1.6419. The dollar rose to 0.7714 Swiss franc from 0.7685 franc and to 97.08 Canadian cents from 96.26 cents.
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