new york (Bloomberg) — The yen dropped the most against the dollar since November as first-quarter results at the world's largest financial firms fuelled speculation they will weather credit market losses.

Japan's currency fell against all of its major counterparts this week as a rally in stocks encouraged investors to increase purchases of higher-yielding assets funded by low-cost loans in Japan. The dollar touched an all-time low against the euro on speculation the European Central Bank won't follow the Federal Reserve in cutting interest rates.

"Many people seem to think we are off the worst now in terms of the credit crisis, or at least close to the end of the game," said Mitul Kotecha, head of foreign-exchange research in London at Calyon, in an interview on Bloomberg Television. "That's helping risk appetite."

The yen depreciated 2.6 percent to 103.67 per dollar this week, from 100.95 on April 11. It's the biggest loss since November. Japan's currency decreased 2.8 percent to 163.96 versus the euro, from 159.55. The dollar was little changed at $1.5817 per euro, compared with $1.5808. The dollar touched $1.5983 on April 17, the lowest level since Europe's currency debuted in 1999.

The British pound increased 1.5 percent this week to within a cent of $2 on speculation the Bank of England will take mortgages off lenders' balance sheets. Sterling rose 1.4 percent to 79.17 pence against the euro after touching an all-time low of 80.99 pence on April 16.

The yen, a safe-haven currency, fell about four percent this week against the Canadian dollar, the Brazilian real and the pound as easing concern that credit market losses will deepen led investors to resume carry trades, in which they get funds in a country with low borrowing costs and invest where returns are higher. Japan's 0.5 percent target lending rate, the lowest among developed nations, compares with 11.75 percent in Brazil, five percent in the UK and 3.5 percent in Canada.

"We are seeing a relief rally in financial markets," said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. "It's a real possibility that the worst of the financial crisis is over."

Citigroup Inc. yesterday posted a $5.11 billion first- quarter loss, which was less than analysts' most pessimistic estimates. Merrill Lynch & Co. chief executive officer John Thain said on April 17 that he's "optimistic" about the firm's prospects for the year, following a "more difficult next couple of months".

JPMorgan Chase & Co. chief Jamie Dimon said on April 16 that the credit crisis is more than half over, a comment echoed by executives at Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Morgan Stanley.

"Citi's report is a bit of a relief in the sense that things are not getting worse," said Camilla Sutton, co-head of currency strategy at Scotia Capital Inc. in Toronto. "Risk reduction is in favour of the dollar and against the yen."

The Standard & Poor's 500 Index advanced 4.3 percent.

The dollar touched a record low against the euro on April 16 as a report showed European inflation accelerated to 3.6 percent last month, the highest in almost 16 years.