Sept. 8 (Bloomberg) -- The yen rose against the euro and dollar before a government report that economists say will show U.K. industrial production grew in July at a slower pace, boosting demand for Japan’s currency as a refuge. The British pound dropped against the yen for a second day amid speculation the Bank of England this week will expand its asset-purchase program, adding to signs the economic recovery will be sluggish. The greenback was close to its lowest level in a year versus Australia’s dollar on speculation Federal Reserve officials will this week signal they plan to hold down borrowing costs, boosting demand for so-called dollar carry trades. “Weaker industrial production and further monetary easing in the U.K. would enhance risk aversion,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp. “That’s supportive of the yen as a refuge.” The yen climbed to 92.79 per dollar as of 12:37 p.m. in Tokyo from 93.08 in London yesterday. Japan’s currency gained to 133.09 per euro from 133.39 per euro. The pound fell to 151.72 yen from 152.17 yen. Australia’s dollar bought 85.44 U.S. cents from 85.57 yesterday, when it touched 85.77 cents, the most since Sept. 1, 2008. The so-called Aussie slipped 0.4 percent to 79.29 yen. The dollar was at $1.4342 per euro from $1.4332. U.K. Factory Outputs The yen advanced against all 16 major counterparts as economists surveyed by Bloomberg News said U.K. factory output may have gained 0.2 percent in July after rising 0.5 percent in June. The Office for National Statistics in London will release the data today. The Bank of England has cut interest rates from 5.75 percent to a record low of 0.50 percent and has taken further steps such as buying bonds in the past 1 1/2 years to support economic growth. The central bank will leave its benchmark rate unchanged at its Sept. 10 meeting, according to all 60 analysts surveyed by Bloomberg News. The yen also strengthened after the Ministry of Finance said Japan’s current-account surplus fell to 1.27 trillion yen ($13.6 billion) in July from a year earlier. The median estimate of 24 economists surveyed by Bloomberg News was for the surplus to shrink to 1.45 trillion yen. Exports tumbled 37.6 percent in July from a year ago, more than June’s 37 percent drop, data from the ministry showed. Imports slid 41.2 percent, easing from 43.8 percent the previous month. ‘Slide in Exports’ “The ongoing slide in exports, the main engine for the Japanese economy, bodes ill for a recovery anytime soon,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “This may spark risk aversion, thereby leading to buying of the yen.” Benchmark interest rates are as low as zero in the U.S. and 0.1 percent in Japan, compared with 3 percent in Australia, making the South Pacific nation’s assets attractive to investors. The dollar weakened before speeches by U.S. policy makers including Chicago Fed President Charles Evans and Dallas Fed President Richard Fisher this week. The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against the currencies of six major U.S. trading partners, was at 77.975 today from 78.012 yesterday. Fisher said last week the U.S. economy will probably undergo an extended period of slow growth while facing “financial headwinds” that will take years to wane, indicating the Fed may maintain its benchmark interest rate as low as zero. ‘Inflation Debate’ “Overall monetary support from the major economies is supporting risky and high-yield currencies,” Greg Gibbs, a currency strategist in Sydney at Royal Bank of Scotland Group Plc, wrote in a research note today. “The U.S. dollar is the most popular funding currency.” Evans will speak on “The Great Inflation Debate” in New York and Fisher will speak on “Today’s Economy: New Challenges for Business” in Dallas tomorrow. Atlanta Fed President Dennis Lockhart will speak in Jacksonville, Florida, and Fed Vice Chairman Donald Kohn will speak in Washington on Sept. 10. In carry trades, investors get funds in a country with relatively low borrowing costs and invest in another nation with higher interest rates.

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