Dollar at two-year low against yen

Currencies took centre stage on Asian markets Friday morning as the dollar fell below Y108 for the first time since the middle of 2005 as speculation grew that the US Federal Reserve would have to cut interest rates further as credit-market losses increase.

The dollar dropped as low as Y107.67, a fall of 0.3 per cent. It also hit a record low against the euro in Asian trading of $1.4967.

The Australian dollar looked set for its third weekly loss and the New Zealand dollar for its fourth successive losing week as risk-averse carry-trade investors liquidated their high-yielding positions to buy yen and dollars. Crude oil pulled further back from its highs earlier in the week, trading around $97 a barrel, on bigger shipments and less demand in the US.

Share markets were mixed, with the biggest, Tokyo, closed for a holiday. Seoul slid 2.5 per cent and Tawian dropped 1.3 per cent. Mainland Chinese markets fell by nearly one per cent.

But in Hong Kong, shares bounced back from two-month lows as the territory's chief executive, Donald Tsang, urged Beijing to allow more mainland companies to list on the city's stock market. Between 15 and 20 Chinese companies, mainly insurers and media firms, are expected to float in the next two years.

The Hang Seng Index ended the morning 1.2 per cent higher at 26,305.45. It was also helped by property tycoon Lee Shau-kee's announcement that he had invested more than HK$1bn on the stock market.

The Hong Kong market has been volatile in recent months, rising by 45 per cent from the depth of the subprime turmoil in August on news that Beijing would allow individual investors to buy shares in Hong Kong, but then falling back by 18 per cent when Beijing seemed to have changed its mind. The latest word from the Hong Kong government was that it expected the scheme to go ahead.

South Korean shares were the biggest losers in Asia, falling for the seventh day running. The Kospi dropped as much as 2.9 per cent but by early afternoon losses had been trimmed to 2.5 per cent, with the index at 1,754. The market fell on gloom about global economic prospects, falling shares in China and fears that regulators might investigate Mirae Asset Securities, one of the country's most successful investment companies. Mirae shares tumbled 14 per cent to Won138,500.

Euro Hits New Record Vs US Dollar

BERLIN (AP) -- The 13-nation euro hit a new record high against the U.S. dollar on Thursday in thin holiday trading.

The euro spiked to $1.4873 before falling back slightly to $1.4833 in afternoon European trading.

Its previous high of $1.4856 was hit Wednesday, before it settled at $1.4848 in late New York trading.

The dollar was down slightly against the yen, buying 108.62 yen from 108.68 yen in late New York trading. The British pound, meanwhile, fell slightly to $2.0634 from $2.0644 the night before.

The U.S. Thanksgiving holiday kept many players on the sidelines, while Japanese financial markets will be closed Friday for the Labor Thanksgiving Day holiday.

While the thin holiday trade could invite sudden, sharp moves, traders expected the market to be largely subdued for the rest of the day.

The euro, the pound and other currencies have been climbing steadily against the dollar since August amid fears for the health of the U.S. economy, stoked by the subprime credit crisis.

The dollar has been further weakened by U.S. interest-rate cuts -- which can be used to jump-start an economy but can also weaken a currency as investors transfer funds to countries where they can earn higher returns. The Federal Reserve has already cut rates twice.