TOKYO, Sep 25 (Reuters) The dollar hung near a record low against the euro and a 15-year low against a basket of currencies on Tuesday amid fears a deepening housing slump could rein in economic growth and prompt more cuts in U.S. interest rates.
Trade was picking up as Tokyo players returned from a long weekend, with sterling under pressure from a report in the British newspaper the Independent that said Britain's deposit protection scheme holds only 4.4 million pounds to protect the country's bank deposits.
But many investors may sit on the sidelines as attention shifts to U.S. existing-home sales and consumer confidence data due later in the session.
Investors are worried that weak economic reports will push the Federal Reserve to follow last week's 50 basis-point rate cut with more policy easing, further eroding the dollar's yield appeal over other currencies.
The U.S. benchmark interest rates stand at 4.75 percent after last week's cut.
''The dollar is hard to recover, as the market is increasingly cautious about the slowdown in the U.S. economy,'' said Hiroshi Yoshida, forex manager at Shinkin Central Bank.
The euro was little changed from late U.S. trading at $1.4070 after striking a record high of $.1.4130 on the electronic trading platform EBS the previous session.
The dollar index, which tracks the dollar's move versus a basket of six currencies, edged up to 78.600, after slipping to a 15-year low of 78.313 on Monday.
Traders were keeping an eye on the all-time low of 78.190 struck in 1992, a level analysts said would provide a test of whether the dollar decline deepens or pauses.
Sterling fell more than 1 percent against the yen to 230.80 yen and was down 0.4 percent against the dollar at $2.0130 The U.S. currency was flat against the yen at 114.80 yen as expectations for a rush of launches of Japanese investment trusts this week to invest overseas assets provided some support, analysts said.
Yasuo Fukuda, a 71-year-old moderate who favours warmer ties with Asia, was voted leader of the Liberal Democratic Party (LDP) on Sunday as widely expected after the abrupt resignation of his predecessor, Shinzo Abe.
He will be officially voted in as prime minister on Tuesday given the LDP's huge majority in parliament's lower house, and a new cabinet is expected to launch later in the day.
But market players said its impact is likely to be limited as many commentators say major personnel changes in the cabinet are unlikely.
Lingering credit concerns as more financial firms released details of damage done to their loan books, restrained the appetite for risk, capping further near-term gains in high-yielding currencies such as the Australian dollar.
The Nikkei share average was down 0.3 percent in early trade following a drop in the U.S. stocks on Monday as financial shares weakened on news that Germany's largest bank may take a big hit from subprime mortgage investments.
The International Monetary Fund on Monday said the turmoil in global credit and money market was likely to continue, and warned that a more severe tightening in credit conditions could not be ruled out, which would worsen the U.S. housing slowdown.
The market brushed aside the minutes of the Bank of Japan's Aug. 22-23 meeting in which the central bank kept interest rates unchanged at 0.5 percent.
The minutes showed some BOJ members said the central bank should adjust interest rates as soon as it becomes confident about its scenario for the economy and financial markets calm down.
Reuters KK VP0725