The yen fell from a three-year high against the euro after the Reserve
Bank of Australia lowered interest rates by the most since 1992,
fueling speculation central banks plan a series of cuts to ease a
financial crisis.
The yen was little changed near a six-month high versus the dollar as
Australian policy makers slashed borrowing costs by a full percentage
point, double the reduction forecast by economists. The euro rebounded
after its biggest one-day drop against the yen since the common
European currency's 1999 debut as the region's stocks and U.S. index
futures rose.
``There is a degree of optimism that we will see coordinated rate cuts,
which is increasing risk appetite and weighing on the yen,'' said Lee
Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi
Ltd. ``In the near term, if these drastic steps do come to fruition,
then we could see a drop in the recent yen gains, which have been
excessive.''
The RBA lowered its overnight cash rate target to 6 percent from 7
percent, adding to last month's quarter-point reduction. Economists
surveyed by Bloomberg News expected a cut to 6.5 percent. The Bank of
Japan today left its benchmark rate unchanged at 0.5 percent.
The likelihood the world's largest economies are on the brink of a
recession is raising speculation central banks will cut interest rates
to revive growth. The Bank of England meets on Oct. 9 to set borrowing
costs, a day before finance ministers and central bankers from the
Group of Seven nations gather in Washington to discuss the deepening
credit-market crisis that has stalled bank lending.
``The Bank of England has been really resisting it for a long time but
now they've got to go'' for lower rates, said Sean Callow, a senior
currency strategist at Westpac Banking Corp. in Sydney. ``The tide is
certainly turning toward rate cuts that weren't on the agenda even a
couple of weeks ago.''
Gains in the euro may be limited on speculation European authorities
will fail to come up with a joint rescue plan for the region's
beleaguered financial system. The U.S. government has earmarked $700
billion to buy distressed assets from lenders following the collapse of
banks including Lehman Brothers Holdings Inc.
``Let's focus on Europe and who's going to fail and how are they going
to build it up,'' said Joseph Tan, chief economist for Asia at Credit
Suisse Private Banking in Singapore. ``I wonder if they can come
together and form a comprehensive package. The euro is negative against
the dollar.''
EUR/USD after growth at the Asian session, the pair is
consolidated within the limits of $1,3515-$ 1,3620. Offers $1.3590/00,
bids $1.3515/10.