Dollar hits 2-week low vs yen, stocks in focus

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Tokyo, Oct 18: The dollar slipped on Thursday, hitting a two-week low against the yen as a plunge in U.S.

housing starts to a 14-year low last month cranked up speculation that the Federal Reserve may cut interest rates in the future.

The U.S. currency took a broadside, with the Fed's Beige Book business survey also showing that U.S. economic growth has slowed since August. On the other hand, core consumer prices rose 0.2 percent last month, in line with forecasts.

The yen edged up, supported by expectations that Group of Seven finance officials on Friday may discuss currencies in the context of the overall economy, which has prompted investors to trim risky trades that involve selling the yen.

Market participants said the yen may extend gains in Tokyo if losses in Asian stocks, including the Chinese market, deepen on Thursday as more stock falls may trigger another round of reducing risky bets that use the low-yielding yen to buy assets in higher-yielding currencies.

''The focus in Tokyo will be on Asian stocks,'' said a trader at a Japanese bank.

''If we see another dive in Chinese and Indian stocks, it could get scary.'' Plans by India to curb foreign inflows sparked panic selling in the country's stock market on Wednesday, pushing prices down as much as 9 percent, and weighing on other regional equities.

The Nikkei share average rose 0.5 percent in early trade on Thursday, recovering after tumbling more than 2 percent on Wednesday.

The dollar slipped 0.25 percent to 116.35 yen its lowest since early October, stung by a 10.2 percent tumble in U.S.

housing starts to an annual rate of 1.191 million units, the slowest since March 1993.

The U.S. currency was also on the back foot due to a surge in oil prices to a record high and rising tensions between Turkey and Kurdish rebels in Iraq, which escalated geopolitical concerns in the currency market.

The euro traded around $1.4205 little changed from levels in late New York on Wednesday but hovering near a record high around $1.4280 hit at the start of the month.

The single European currency fell around 0.2 percent to 165.30 pulling further away from a 2 1/2-month high around 167.75 yen hit earlier in the week.

High-yielding currencies like the Australian and New Zealand dollars remained under selling pressure against the yen, with both currencies pulling further away from their highest levels in roughly two months hit in the past week.

The New Zealand dollar was stung after New Zealand Finance Minister Michael Cullen told Reuters on Thursday that its currency remained somewhat overvalued.

The kiwi slipped to the day's low $0.7480 edging further away from a 2 1/2-month high hit earlier in the week, before paring some losses to around $0.7505.

REUTERS>

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