All about business

The U.S. dollar was mixed Friday, after tumbling to a 13-year low versus the yen, as the U.S. government scrambled to salvage a bailout deal for the nation’s ailing automakers.

Japan’s yen dragged the dollar to ¥89.42 in early trading, breaking through the psychologically important ¥90 level for the first time since 1995. But the dollar regained ground later in the day to trade at ¥91.13, down from ¥91.61 late Thursday.

Meanwhile, the British pound retreated against the dollar, while the euro held its ground after a big rally in the previous session.

The 15-nation euro was trading at $1.3367 from $1.3353. The pound slid to $1.4944 from $1.5024.

The dollar’s narrow range comes as investors responded to the collapse Thursday night of a proposed $14 billion government loan package for General Motors (GM, Fortune 500) and Chrysler.

"The failure of the rescue package for the automakers was another disappointing outcome," said Gareth Sylvester, currency strategist at foreign exchange brokerage HiFX. "It creates uncertainty and that’s what’s driving the market right now."

General Motors and Chrysler have both said they will run out of the cash needed to stay in business next year if they do not receive the government loans they have requested. Investors worry that a bankruptcy in the auto industry will exacerbate already rising unemployment and further undermine the economy.

But the market was bolstered by signs that the Treasury Department may authorize some of the $700 billion bailout passed in October to help aid the automakers.

Shifting pattern: On Thursday, the euro jumped 4 cents against the dollar to a high of $1 advance payday loans.34, breaking out of the range it had been in since October.

At the same time, stock prices tumbled, prompting some analysts to speculate that the correlation between the dollar and world equity markets was weakening.

The greenback often rallies when stock prices fall as investors pull out of more risky assets and take shelter in dollars. Conversely, the dollar often falls when stocks rise, indicating that investors’ appetite for risk has increased.

"The correlation between the currency and equity markets has been weakening recently," said Steve Malyon, currency strategist at Scotia Capital in Toronto, in a research report.

However, Malyon notes that the declines in the stock market in December have been less severe than in previous months.

"This has made it more difficult to determine whether the dollar retains the safe-haven allure that was so evident in October and November," Malyon added.

Stocks seesawed Friday as investors responded to the uncertainty surrounding the automaker bailout. The Dow Jones industrial average ended up 65 points.

Sylvester thinks the dollar will remain linked with the stock market. But he added that the swings are likely to be less dramatic as market volatility subsides.

"Will we see dollar rally as strongly as we’ve seen in the past few months, probably not," he said. But the "prolonged bottoming out process [happening in the stock market] will keep the dollar buoyed." 

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