The yen gained against the Australian dollar after the Reserve Bank of Australia lowered borrowing costs by three quarters of a percentage point to 5.25 percent today. It also advanced versus the euro and the British pound, before expected rate reductions by the European Central Bank and the Bank of England this week.
The RBA, which has lowered its benchmark interest rate three times in a row, said the reduction was necessary because of financial-market turmoil and weaker-than-expected consumer spending. Economists expected a smaller reduction to 5.5 percent.
The Japanese currency is popular in carry trades, where purchases of higher-yielding assets are funded in nations with lower interest rates. Japan's key rate is 0.3 percent, the lowest among major economies.
Foreign-exchange markets may be ``distracted'' by the U.S. presidential elections starting later today, according to UBS AG, the world's second-largest currency trader.
Democratic nominee Barack Obama held 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.
The euro fell for a fourth day against the dollar on speculation the European Central Bank will lower rates to cushion the impact of a slowing economy. The ECB will trim its benchmark rate by half a percentage point to 3.25 percent when it announces a policy decision on Nov. 6.
The Euro-zone economy probably entered a recession this year and will stagnate in 2009, the European Commission said yesterday. European manufacturing contracted at a record pace in October and faster than initially estimated, data showed yesterday.
The Bank of England will lower its key interest rate to 4 percent from 4.5 percent at a meeting ending Nov. 6, according to economists surveyed by Bloomberg. The Federal Reserve reduced its target lending rate by a half-percentage point to 1 percent on Oct. 29. Central banks in China, Taiwan, Hong Kong, India and the Middle East also cut borrowing costs in the past week as policy makers race to avert a global recession.
EUR/USD the pair has established session low in area $1,2515 then has receded in area $1,2650.