The yen rose against the dollar, following the biggest decline
since 1974, as a drop in U.S. stock futures prompted investors to pare
holdings of higher- yielding assets funded with Japan's currency.
The yen gained against the Australian dollar and the South African rand,
two favorite targets of so-called carry trades, as Standard &
Poor's 500 index futures fell as much as 2 percent. The dollar weakened
against the euro as traders bet the Federal Reserve will cut interest
rates later today before data that may show the world's largest economy
contracted the most since 2001.
The Federal Reserve will lower its 1.5 percent target lending rate by a
half-percentage point at the conclusion of its two-day policy meeting
today, according to the median forecast of conomists . Policy makers
are scheduled to announce the decision at 18:15 GMT in Washington.
Futures on the Chicago Board of Trade show a 46 percent chance the
central bank will cut rates by three-quarters of a point.
U.S. consumer confidence slumped to a record low this month, a report
showed yesterday. Gross domestic product shrank by 0.5 percent in the
third quarter for its biggest decline since the 2001 recession, data
tomorrow may show, according to a separate survey.
The yen rose on speculation a rate cut or currency market intervention from the Bank of Japan won't stem its recent gains. The
strength in the yen has eroded Japanese exporters' overseas income.
Honda Motor Co., Japan's second-largest automaker, cut its operating
profit forecast for the year ended in March 2009 by 13 percent to 550
billion yen ($5.6 billion).
The BOJ is ``leaning toward'' reducing its target rate by a
quarter-percentage point to 0.25 percent when it announces a policy
decision on Oct. 31, the Nikkei newspaper reported without citing
anyone.
EUR/USD having shown session low in the field of $1,2630, the pair has receded in area $1,2750.