NEW YORK -- The yen fell broadly Monday as stocks staged a late afternoon rally and investors waded back into risky trades after last week's surprise cut in the Federal Reserve's discount lending rate.

The Japanese currency rallied last week as losses in risky U.S. mortgage debt dulled investors' appetite for risk and prompted them to unwind carry trades that involved borrowing yen cheaply to buy higher-yielding currencies and assets.

The Fed responded on Friday by cutting the discount rate it charges on direct loans to banks by half a percentage point to 5.75 percent.

That halted a global sell-off in stocks, a rally in government bonds and the rush to dump high-yielding currencies in favor of the yen. It also got Wall Street gearing up for the Fed to cut by year end its benchmark federal funds rate, which it has held at 5.25 percent since June 2006.

While credit market turmoil may continue to make buying commodities and debt difficult, high-yield "currencies are probably off to the races again, as the Japanese won't raise rates rapidly and the Fed is going to have to cut rates," said Monty Guild, principal of Guild Invesetment Management in Los Angeles.

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In recent trade, the dollar was up 0.5 percent at 114.95 yen, off a session low of 113.69 yen. The euro was also up 0.5 percent at 154.90 yen and up 0.1 percent at $1.3481.

The Australian dollar, another high-yielding target of carry traders, put in its best day in seven weeks, rising 1.25 percent to $0.8080.

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