The yen fell against the dollar Friday after the Group of Seven 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 desire for 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 New York Friday the dollar rose to 81.05 yen from 79.05 yen late Thursday. The yen strengthened a bit in New York after weakening to 81.99 per dollar in overnight trading. The euro rose to $1.4131 from $1.4007.
Before the earthquake struck in Japan, one dollar bought 83.02 yen. The dollar had weakened to as little as 76.32 yen on Wednesday, the highest point for 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.
The G-7's deal to weaken the yen, announced late Thursday, is meant to support Japan's economy.
"Stabilization of the yen should work to moderate concerns about global growth," wrote Credit Suisse analysts in a research note Friday. The move 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 gained 1 percent, while crude traded around $101 per barrel.
The British pound rose to $1.6162 from $1.6136, while the dollar fell to 98.41 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 gained to 0.9041 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.