Mumbai: The yen fell to a 5-1/2-year low against the dollar and ended lower from a one-month high against the euro on speculation that rising global bond yields will prompt Japanese investors to keep buying overseas assets.

The Japanese currency dropped to its lowest against the US greenback since December 2002 as former Federal Reserve chairman Alan Greenspan predicted a decline in US bonds, pushing 10-year yields to the highest since 2002.

The yen has fallen 5.6 per cent against the dollar in the past year as Japanese ploughed cash into overseas debt funds and borrowed yen to buy higher-yielding assets in so-called carry trades.

The yen slipped to 122.30 against the dollar at 9:53 a.m. in London and reached 122.32, the lowest since December 13, 2002, from 121.69 late in New York on June 12. It also fell to 162.43 per euro from a one-month high of 161.51.

The benchmark US 10-year bond yielded 3.36 percentage points more than similar-maturity Japanese bonds, the most since August, 2003, reports said. A month ago, the yield spread was about 3 percentage points.

The yen slid against all 16 of the most-active currencies.

Southeast Asian currencies also slid, paced by the Indonesian rupiah, the Malaysian ringgit and the Philippine peso, after Greenspan also predicted a slump in emerging-market debt. The rupiah fell 1 per cent to 9079 per dollar and the peso dropped 0.5 per cent to 46.72 per dollar.

The dollar was at an 11-week high against the euro on speculation the Federal Reserve will raise interest rates by a quarter of a percentage point by year-end. The US currency traded at $1.3278 per euro from $1.3302, and reached $1.3287, the strongest since March 26. It may rise to $1.3260 per euro.

Meanwhile, the Chinese yuan rose to its strongest since 2005 on speculation China will allow faster gains to help ease trade tensions with the US , after treasury secretary Henry Paulson urged increased currency flexibility.

Some US senators plan to introduce legislation in Congress to push China to let the yuan rise quicker to reduce its record trade surplus. Paulson had suggested that China isn''t moving fast enough on the exchange rate, a day before a treasury report on whether countries manipulate their currency.

The yuan gained 0.23 per cent to 7.6260 against the dollar, the highest since the end of a decade-old link in July 2005, before trading at 7.6278 in Shanghai.

The currency, which is allowed to rise or fall 0.5 per cent from a daily fixing rate, has risen 8.5 per cent since China dropped the fixed exchange rate, after last week posting the first weekly decline since April.