The New Zealand and Australian dollars tumbled against the yen as Japan's currency broke through key resistance levels to reach a record high against the greenback on bets the nation's nuclear crisis will spur its citizens to repatriate overseas funds.
The kiwi dollar fell to 55.49 yen from 59.05 yen
yesterday, and shed almost 5 per cent in less than an hour. The Australian dollar dropped to 75.64 yen from 80.13. The US dollar fell to 77.61 yen and traded as low as 76.99 yen, from 80.82 yen yesterday.
Japan's currency has soared amid expectations its citizens, facing radiation leaks from exploding nuclear power plants on top of last week's devastating earthquake and the tsunamis it triggered, will want to have their money close at hand and will sell overseas holdings.
The yen's strength is also stoking talk that the Bank of Japan will intervene to weaken its currency and limit the impact on an economy that exports to the world.
The yen has "smashed through options. All stops are going through," said Alex Sinton, a senior dealer at ANZ National. "It has dragged down the kiwi and Aussie."
While there is scope for a bounce in the yen given its historic levels, "no-one really knows" how the response to Japan's disasters will play out, he said. "You would have to suspect (the Japanese) would want funds offshore as close as possible.
Repatriation may well be around some of the flows."
Fears of the widening impact of Japan's nuclear crisis has spurred the governments of European nations to suggest their citizens leave Tokyo, while the head of the International Atomic Energy Agency International, Yukiya Amano, said the situation at Tokyo Electric Power's Fukushima Dai-Ichi nuclear plant is "very serious."
Reuters reported a European official as saying Japan's efforts to contain radiation at the site are "effectively out of control."
The Bank of Japan pumped 5 trillion yen into the nation's financial system, the third day in a row it has added support and traders say there is more prospect the central bank will act to weaken its currency.
Currency movements tend to bet amplified during big fluctuations as traders rush to reverse losing bets on direction and level.
