The yen fell against the dollar and the euro as a rally in Asian
and European stocks encouraged investors to step up purchases of
higher-yielding assets financed with the Japanese currency.
The yen also weakened versus Australia's dollar on expectations the Reserve Bank of Australia will cut interest rates tomorrow to sustain economic growth.
Economists forecast the Reserve Bank of Australia will cut its
benchmark interest rate by a half-percentage point to 5.5 percent
tomorrow, after policy makers in the U.S., Japan and China announced
reductions last week.
The Federal Reserve lowered its target rate to 1 percent last week,
matching a half-century low, after a government report showed the U.S.
economy contracted by the most since 2001 in the third quarter. Futures
on the Chicago Board of Trade indicate a 55 percent probability the Fed
will reduce the target rate to 0.5 percent at its Dec. 16 meeting. The
odds a week ago were zero.
Gains by the euro and pound may be muted on speculation the
European Central Bank and the Bank of England will reduce their key
interest rates by a half-percentage point to 3.25 percent and 4
percent, respectively, at policy meetings on Nov. 6, according to
surveys of economists. The euro-area economy probably entered a
recession in the third quarter and will grow 0.1 percent next year, the
worst performance since 1993, the European Commission said today.
The dollar fell for the first time in three days against the euro on speculation slowing growth in the world's largest economy will support the case for the Fed to cut interest rates.
The Institute for Supply Management's factory index, scheduled for
release at 10 a.m. in New York, declined to 41.5 in October from 43.5
the previous month. A Labor Department report on Nov. 7 will probably
show payrolls fell for a 10th straight month in October, a separate
survey showed.
Democratic presidential nominee Barack Obama holds a 54 percent to 43
percent lead among likely voters over Republican candidate John McCain
in the presidential campaign, according to a Washington Post-ABC News
tracking poll.
EUR/USD in current European session the rate was consolidated within the limits of $1,2780-$ 1,2890.