By Catarina Saraiva and Keith Jenkins June 23 (Bloomberg) -- The yen gained against the euro for a fourth day and rose versus the dollar as concern that weakness in European manufacturing and U.S. housing will hamper the global recovery spurred demand for the currency as a refuge. The dollar traded near a four-week low versus the yen before a report that’s forecast to show U.S. new-home sales plunged in May the most in 16 years. Japan’s currency rose against 13 of its 16 most-active counterparts after data showed growth in European services and manufacturing industries slowed in June. Australia’s dollar pared gains after a report the prime minister may face a leadership challenge tomorrow. “Housing has always been the weakest link in the U.S. economic-recovery story,” said Boris Schlossberg, director of research at online currency trader GFT Forex in New York. “It’s a very significant part of the total overall U.S. GDP. It could be a drag on growth into the second half.” The dollar weakened 0.5 percent to 90.15 yen at 9:06 a.m. in New York, from 90.57 yesterday. It touched 90.09, near a one- month low of 89.97 reached June 21. The euro fell 0.4 percent to 110.74 yen, from 111.14 yesterday, after earlier slipping to 110.53, the lowest since June 11. The euro was little changed at $1.2279, from $1.2271. “The medium-term picture for the euro is still bearish,” said Ian Stannard, a senior foreign-exchange strategist at BNP Paribas SA in London. “The recovery we’ve seen since the beginning of June has pretty much run out of steam. The yen benefits from some support on safe-haven demand.” New-Home Sales Existing-home sales fell 2.2 percent in May, data from the National Association of Realtors showed yesterday. Markit Economics said today a composite index based on a survey of euro-area purchasing managers in services and manufacturing fell to 56, from 56.4 in May. Economists forecast a drop to 55.8, according to the median in a Bloomberg survey. The yen typically strengthens in times of financial turmoil as Japan’s trade surplus makes the currency attractive because it means the nation doesn’t have to rely on overseas lenders. Australian Dollar Australia’s dollar traded at 87.379 U.S. cents, up 0.2 percent, after Sky News reported Prime Minister Kevin Rudd has lost support from some members of his party and may face a leadership challenge from Deputy Prime Minister Julia Gillard tomorrow. Earlier it rose as much as 0.6 percent. The greenback headed for a second daily decline against the yen before the Federal Open Market Committee ends a two-day meeting and releases a policy statement. The Fed will hold the benchmark rate at the record low range of zero to 0.25 percent today, a Bloomberg survey showed. “The focus should be on the statement’s assessment for the U.S. economy, given the latest drag on U.S. equities by disappointing U.S. residential property data,” Philip Wee, a senior currency economist in Singapore at DBS Group Holdings Ltd., wrote in a research note today. The Standard & Poor’s 500 Index slipped 1.6 percent yesterday. Futures on the index rose 0.4 percent today. The pound gained to its strongest level against the euro in more than a week after minutes of the Bank of England’s June meeting showed policy maker Andrew Sentance voted for an interest-rate increase. The Monetary Policy Committee voted 7-1 to keep the benchmark interest rate at 0.5 percent, according to minutes of the decision released in London today. Sentance favored an increase to 0.75 percent, arguing that inflation was proving to be “resilient.” U.K. Budget Plan U.K. Prime Minister David Cameron’s budget won the endorsement of Fitch Ratings for the biggest cutbacks in 50 years. Fitch said yesterday the “ambitious” plan ensured Britain would keep its AAA credit rating. The deficit cuts planned by Chancellor of the Exchequer George Osborne and measures proposed by the previous Labour government total 113 billion pounds ($167.5 billion), 15 percent of the 737 billion-pound budget foreseen for 2015, the Treasury said. The pound strengthened 0.7 percent today to 82.24 pence per euro, the strongest since June 11, from 82.83 pence yesterday. It was up 0.73 percent to $1.4922, from $1.4816 yesterday. Credit Agricole SA yesterday said it will take a 400 million euro ($491 million) writedown on its stake in Emporiki Bank of Greece SA. Standard & Poor’s Ratings Services said in a report on June 21 that Spanish banks face “difficult years” in 2010 and 2011 as credit losses mount and revenue generation comes under “substantial strain.” “A wealth of worrying credit news is rekindling fears over the health of the European banking sector,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This is weighing on the euro.” --Editors: Greg Storey, James Holloway %USD %EUR %JPY %GBP To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at Kjenkins3@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net.

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