Nov. 13 (Bloomberg) -- The yen fell against all 16 of the most-active currencies as Bank of Japan Governor Toshihiko Fukui said there was no set time for raising interest rates.

The currency dropped the most in eight weeks versus the euro and more than 2 percent against the New Zealand and Australian dollar after the BOJ held its overnight lending rate and Japanese Prime Minister Yasuo Fukuda said the currency's volatility is undesirable. The dollar fell against the euro after a United Arab Emirates central bank official said the country's dollar peg was at a ``crossroads.''

The yen's recent gains have ``just been seen as a selling opportunity,'' said Neil Mellor, a currency strategist in London for The Bank of New York Mellon Corp., the world's largest custodian of investor assets. ``By no means does the move signal that concerns about growth and inflation have dissipated.''

The yen fell to 110.18 per dollar as of 7:38 a.m. in New York, from 109.41 in New York yesterday, when it rose to 109.13, the highest since May 17, 2006. The yen slid 1.2 percent to 160.95 per euro, from 158.99.

The dollar fell against the euro on speculation economic data this week will show weakness in U.S. housing and consumer spending, pressuring the central bank to ease monetary policy a third time this year. It dropped to $1.4610 against the euro, from $1.4531 late yesterday in New York.

Zew Confidence Survey

The euro's gains helped weaken investor confidence to its lowest in almost 15 years in Germany, according to the ZEW Center for European Economic Research in Mannheim.

The center reported that its index of investor and analyst expectations dropped to minus 32.5, the lowest since February 1993, from minus 18.1 last month. Economists expected a decline to minus 20, according to the median of 38 forecasts in a Bloomberg News survey.

``The weaker confidence numbers won't do much to harm the euro because of the hawkish tone in European Central Bank language,'' said Carsten Fritsch, a currency strategist at Commerzbank AG in Frankfurt. Commerzbank's year-end forecast for the euro is $1.45.

The euro's appreciation hasn't been drastic enough to warrant central bank intervention, IMF European Director Michael Deppler said yesterday in London.

``At the moment, intervention is probably not necessary,'' he said. Currency movements are ``not disorderly yet.''

French and British inflation accelerated in October on higher oil and food costs, suggesting the Bank of England and the European Central Bank may not lower interest rates this year as rising credit costs and currency appreciation slow economic growth.

Interest Rates

The dollar has declined 2.7 percent against the euro this quarter, as the Federal Reserve lowered interest rates twice to 4.5 percent while the European Central Bank left its benchmark unchanged. Lower interest rates make investing in the U.S. less attractive relative to the EU, weakening the dollar.

The U.S. currency fell to $1.4752 on Nov. 9, an all-time low against the synthetic euro, a theoretical value that estimates where the currency would have traded before its inception. The previous record was $1.4557 set in 1992.

The dollar declined against the euro after comments from United Arab Emirates central bank Governor Sultan Bin Nasser al- Suwaidi fueled speculation the country may end its fixed-exchange rate against the U.S. currency.

``We have reached a crossroads now with a further deterioration in the U.S. dollar and expected further weakening of the U.S. economy,'' Reuters cited him as saying in Tokyo today.

Council Decision

The U.A.E. has no plans to drop the peg alone and any decision will be made by the Gulf Cooperation Council ``at the right time,'' he said, according to the report.

The country may join Kuwait in dropping the dollar peg as inflationary pressure from European imports makes a fixed- exchange rate unsustainable, Merrill Lynch analysts said in a note on Nov. 8.

The Bank of Japan voted 8-to-1 to keep the country's benchmark rate unchanged at 0.5 percent, the lowest among industrialized economies, spurring investors to sell the yen after it reached a 1 1/2 year low yesterday.

The BOJ outlook may encourage traders to resume carry trades, in which they borrow in a country with low interest rates and invest the funds in a currency where rates are higher, earning the spread between the borrowing and lending rates.

``Expectations of low rates mean there's no reason to buy the yen aggressively,'' said Nobuaki Tani, client manager in Tokyo at Resona Bank Ltd., a unit of Japan's fourth-largest publicly traded lender.

Currency Volatility

One-month implied volatility for the yen fell to 15.75 percent today, down from 17.45 percent yesterday. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Lower volatility encourages carry trades, as it implies less risk that exchange-rate fluctuations will erase profits.

The Japanese currency declined 2.9 percent to 98.65 against Australia's dollar, from 95.83 in New York yesterday. It also slid 2.9 percent to 83.70 per New Zealand's dollar from 81.37.

The yen remained lower even after a government report showed Japan's economy expanded an annualized 2.6 percent in the third quarter after a revised 1.6 percent contraction in the second.

Prime Minister Fukuda said speculators should be very careful not to provoke intervention, in an interview in the Financial Times.

Central banks from Bogota to Mumbai are imposing foreign- exchange curbs to take control of their soaring currencies from traders dumping the dollar.

In Colombia, international investors buying stocks and bonds must leave a 40 percent deposit at Banco de la Republica for six months. The Reserve Bank of India created a bureaucratic thicket to curb speculation by foreign money managers. The Bank of Korea is investigating trading of currency forward contracts to limit gains in the won.

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net

Last Updated: November 13, 2007 07:40 EST