The dollar held just above a 15-year low against a basket of currencies on Friday as investors awaited data on US retail sales for clues on whether the housing market troubles are hurting the economy further.
The yen slipped and stayed weak against most higher-yielding currencies as the broad rise in regional stock indexes along with signs of calmer conditions in credit markets made investors comfortable holding risky positions such as carry trades.
The pound edged down on a BBC report that British mortgage lender Northern Rock is getting emergency financial support from the Bank of England to help relieve its reliance on strained money markets for funds.
Investors remain on edge about reports of banks or funds suffering big losses tied to US subprime mortgages or facing big commitments to the nearly frozen market for asset-backed commercial paper. The dollar's woes remain the main focus after the currency tumbled to a record low versus the euro on widespread expectations for the Federal Reserve to start cutting interest rates next week to limit the US economy's slowdown.
The squeeze in money markets and signs of a deeper US housing downturn have convinced market players that the Fed will cut rates next week by at least 25 basis points and possibly 50 basis points from the current 5.25 percent.
US retail sales are forecast to have risen 0.4 percent in August following a 0.3 percent gain the previous month, which would show household spending holding up at a decent pace.
"A good figure is not enough to change the picture. There will be more adjustments in the housing market and that may affect consumption in coming months," said Masafumi Yamamoto, a currency economist at Nikko Citigroup in Tokyo. The dollar's trade-weighted index against six major currencies rose 0.15 percent to 79.634, crawling up from the 15-year low of 79.302 hit the previous day.
The dollar was flat from late US trade near 115.00 yen after climbing as high as 115.50 yen the previous day, well off the 14-month low of 111.60 yen hit last month.
Higher-yielding currencies pulled away from session lows hit on the BBC report and as some market players in Japan took profits before a long weekend, with a national holiday on Monday. The yen's broad slide against higher-yielding currencies has also helped prop up the dollar against the Japanese currency.
"Firmness in Tokyo shares seem to be encouraging players to unwind yen holdings," said a dealer at a Japanese trust bank. The euro was little changed near 159.50 yen after having scaled a one-month high of 160.48 yen the previous day.
The single European currency barely budged near $1.3870 after striking $1.3930 on Thursday, the highest since its launch in 1999. The pound eased 0.17 percent against the dollar to $2.0186 and dipped 0.13 percent to 232.15 yen. In contrast to the Fed, other central banks have stuck to their view that growth is in good shape and higher rates may be needed to keep inflation in check, with the Swiss National Bank lifting rates on Thursday.