Currency markets reversed some of the gains of the yen after the G-7 announced that they would intervene to reduce the value of the yen. The Japanese currency lost nearly two yen against the dollar on currency markets.
The yen fell against the dollar Friday after the Group of Seven major industrialized nations moved to weaken the Japanese currency. But the safe-haven dollar dropped against most other currencies Friday following the coordinated currency intervention and a cease-fire in Libya.
The dollar, yen and Swiss franc tend to strengthen during times of geopolitical stress and other tensions that spark a flight to safe investments. Emerging-market currencies and currencies in regions where interest rates are higher, like the euro, often gain when investors want to take on risk in the hopes of higher returns.
The dollar rose to 80.96 yen late Friday from 79.05 yen Thursday. The yen strengthened a bit in New York after weakening to 81.99 per dollar in overnight trading. The euro rose to $1.4159 from $1.4007.
Before the earthquake and tsunami struck Japan last week, one dollar bought 83.02 yen. The dollar had fallen to 76.32 yen on Wednesday, the weakest level for the greenback against the yen since World War II. Investors thought the Japanese would end their overseas bets and bring money home, in part to fund Japan's reconstruction.
But the currency's climb threatened to deepen the economic hit to Japan's economy. A stronger yen hurts profits of the country's exporters and makes imports cheaper. The weak dollar also heightened concerns about inflation in the U.S.
"Stabilization of the yen should work to moderate concerns about global growth," wrote Credit Suisse analysts in a research note Friday. The move, announced late Thursday, seemed to reassure investors, and they bet on currencies perceived as riskier.
The prospect of a cease-fire in Libya, a major oil exporter, also helped calm markets. Libya declared a cease-fire with rebels Friday after the threat of intervention from abroad. The U.N. late on Thursday authorized a no-fly zone and said it would take "all necessary measures," including airstrikes, to prevent forces loyal to Moammar Gadhafi from striking against rebelling Libyans.
The clash in Libya had helped drive up oil prices as much as 27 percent in recent weeks. On Friday, stocks rose on Wall Street and oil prices fell. The Dow Jones industrial average was up about 0.6 percent in late trading, while crude traded around $101 per barrel.
The British pound rose to $1.6219 from $1.6136, while the dollar fell to 98.61 Canadian cents from 98.71 Canadian cents. It was also lower against most other currencies including the Brazilian real and Mexican peso, the South Korean won, the Scandinavian currencies and the Australian dollar.
The U.S. currency strengthened to 0.9017 Swiss franc from 0.9002 Swiss franc. The franc is also considered a safe haven asset, and the dollar hit its latest record low against the currency Wednesday at 0.8922 Swiss franc.