The yen advanced against the dollar and the euro on concern the credit crisis may cause the global economy to fall into a recession, spurring investors to sell higher-yielding assets funded in Japan.
The yen gained against 15 of the 16 most-active currencies before a government report today that economists forecast will show U.S. builders began work in September on the fewest homes in 17 years, adding to signs of a slowdown in the world's largest economy.
``It's still very early to see whether these bank-rescue packages will be sufficient, so we still have a defensive position to buy yen,'' said Michael Metcalfe, head of macro strategy at State Street Global Markets in London. ``Risk appetite is still the principal driver.''
U.S. housing starts declined to an annual rate of 872,000 homes in September, the fewest since January 1991, from 895,000 in August, according to a survey of economists. The Commerce Department will release the report at 8:30 a.m. in Washington.
The U.S. currency also dropped against the yen and the Swiss franc as traders added to bets on a Federal Reserve interest-rate cut.
Futures traded on the Chicago Board of Trade show a 46 percent chance the Fed will lower its 1.5 percent target rate for overnight bank loans by a half-percentage point to 1 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a week ago. The odds of a quarter-point reduction are 54 percent.
EUR/USD having tested session high on $1,3520, the pair has decreased in area $1,3380. Bids $1.3380, $1.3350/45. Offers $1.3520, $1.3550.
GBP/USD bargains within the limits of a range $1,7250-$ 1,7360. Bids $1.7250, $1.7210/00. Offers $1.7340/50, $1.7380/85.
USD/JPY having shown minima on Y100,60, the pair has receded above level Y101,00. Bids Y100.00, Y99.30. Offers Y101.40/50.
US data sees the 1230GMT release of housing starts and building permits for September, followed by the 1355GMT release of the University of Michigan preliminary consumer sentiment data for October. Housing
starts are forecast to fall to an 885,000 annual rate in September after two sharp declines, while the Reuters/University of Michigan Consumer Sentiment Index is expected to fall to a reading of 65.0 in early-October on the intense market turmoil seen at the end of September and early-October.