By RIVA FROYMOVICH

September 20, 2008

NEW YORK — The yen tumbled Friday to multisession lows after the U.S. government announced measures designed to stem the turmoil in financial markets.

The euro and dollar rose to nearly two-week highs of 155.35 yen and 108.04 yen, respectively, a sharp turnaround from the dollar’s slide below 104.00 yen just a day earlier on fears of an unraveling on Wall Street.

The boost given to the appetite for risk, along with a rally in crude oil prices, helped the higher-yielding currencies, including the euro. The U.K. pound rose to its highest level against the greenback this month, and the Australian dollar advanced to more than a two-week high.

Currency analysts said the moves were an expression of relief following the widest-reaching government intervention in financial markets since the 1930s. However, traders aren’t ready to completely jump back into riskier currencies after more than a month of massive deleveraging.

“This is a time to take risk only very selectively and very tactically,” said UBS foreign-exchange strategist Roderick Ngotho.

“We expect that despite the actions of global monetary authorities, the markets will continue to place a premium on liquidity,” he said.

Credit Suisse analysts added: “[The government] may halt the implosion of the U.S. financial system, but the extensive damage to risk appetite among lenders and U.S. households will likely not fully reverse quickly.”

Friday afternoon in New York, the euro was at $1.4474, up from $1.4305 late Thursday. The dollar was at 107.27 yen, up from 105.65 yen. The euro was at 155.27 yen, up from 151.14 yen. The U.K. pound was at $1.8355, up from $1.8144, and the dollar was at 1.1029 Swiss francs, down from 1.1078 francs Thursday.

The new measures announced Thursday and Friday offering a lifeline to financial markets include a temporary guaranty program from the Treasury for U.S. money-market mutual funds; agency discount note purchase auctions by the Fed; cheap Fed loans to finance purchases of asset-backed commercial paper from money-market mutual funds; a prohibition on short-selling in 799 financial-company stocks for at least 10 days, and a coordinated action by central banks around the world to pump billions of dollars into global financial markets to improve lending conditions for banks.

Regulators are also said to be in talks on a mechanism that would take bad assets off the balance sheets of financial companies.

While the moves sent the Dow Jones Industrial Average up 368.75 points Friday, the growth outlook for the U.S. will be “further hobbled by the enormous flows of funds that will be required” to finance the government measure, said Carl Weinberg, chief economist at High Frequency Economics.

In addition, he said, it won’t provide any help to looming recession in the euro zone and Japan.

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