TOKYO - The dollar plunged to a 13-year-low against the yen on Friday, following the collapse of an US$14 billion (S$20.9 billion) emergency bailout for US automakers.

The dollar fell as low as 88.16 yen (S$1.46) in afternoon trading in Tokyo, its lowest level since Aug 2, 1995, when the US currency was at 88.02 yen.

It later recovered to 89.72 yen, but remained well under the 91.43 yen mark from late Thursday.

The US$14 billion rescue package, which was approved by the House of Representatives, unraveled in the Senate after bipartisan talks broke down over Republican demands that the unions agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

The news also extended losses in Japanese stocks. The benchmark Nikkei 225 stock average shed 5.6 per cent to 8,235.87.

A strong yen is the last thing Japanese exporters need.

Major manufacturers including Toyota Motor Corp and Sony Corp are already reeling from slumping global demand. Yen appreciation erodes overseas profits when repatriated to Japan and makes products more expensive abroad. -- AP