Oct. 15 — The dollar traded near a nine-week high against the yen on speculation Federal Reserve Chairman Ben S. Bernanke will say the U.S. economy is strong enough to weather a housing slowdown.

The currency gained for a second day against the euro as a U.S. retail sales report on Oct. 12 beat economists’ estimates, suggesting a housing slump isn’t weighing on consumer spending. Futures traders have trimmed bets that the Fed will cut its benchmark interest rate for a second time this year.

“The dollar is starting to stage a comeback,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Bernanke is likely to soothe concerns that the U.S. economy is headed for recession. Traders who got overly pessimistic on the U.S. outlook are changing their tune.”

The dollar traded at 117.56 yen at 7:53 a.m. in London compared with 117.61 late in New York on Oct. 12. It reached 117.78 on Oct. 11, the highest since Aug. 14. Against the euro, it was at $1.4173 from $1.4178, strengthening from a record low of $1.4283 reached on Oct. 1. The U.S. currency may rise to 117.90 yen today, Soma said.

Bernanke speaks on the economic outlook at 7 p.m. today, at a dinner hosted by the Economic Club of New York. Interest-rate futures show a 32 percent chance the Fed will lower its benchmark rate to 4.5 percent at its next meeting on Oct. 31, down from 48 percent a week ago.

The U.S. central bank cut its benchmark by a half percentage point to 4.75 percent on Sept. 18 as losses on loans to homeowners with poor credit sparked an increase in short-term borrowing costs.

G-7 Meeting

The euro may fall against the dollar on speculation European officials will discourage a rise in the currency before a Group of Seven nations meeting on Oct. 19 in Washington.

European Central Bank President Jean-Claude Trichet said excess foreign exchange volatility is undesirable and yen investors need to take account of Japan’s economy, in an interview on broadcaster CNBC. Emerging Asian economies should allow their currencies to be more flexible, he also said.

Luxembourg Prime and Finance Minister Jean-Claude Juncker said Oct 8 the euro’s 13.3 percent rise against the dollar and 11.4 percent gain against the yen in the past year is enough to solve trade imbalances.

The difference in the number of wagers by speculators on an advance in the euro compared with those on a drop, known as net longs, was 87,166 futures contracts on Oct. 9, compared with net longs of 94,440 a week earlier, according to the Commodity Futures Trading Commission in Washington.

“There’s a risk we see an unwind in euro-long positions this week,” said Osamu Takashima, chief analyst for global market sales and trading at Bank of Tokyo Mitsubishi UFJ Ltd. in Tokyo. “Euro appreciation is uncomfortable for some European officials.”

The euro may fall to $1.40 this week, he said.

Swiss Franc

The Swiss franc fell to a record low against the euro as U.S. banks are joining forces to revive the market for asset- backed commercial paper, giving a boost to investors’ appetite for carry trades. The euro bought 1.6795 Swiss francs from 1.6798 and below a record high of 1.6847.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.

Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. will announce as soon as tomorrow that they are establishing a fund of about $80 billion aimed at reviving the asset-backed commercial paper market, said people familiar with the plan.

Commercial Paper

The amount of outstanding asset-backed commercial paper tumbled to $899 billion in the week ended Oct. 10, from a high of $1.14 trillion at the end of June, according to Fed data, as rising defaults on U.S. subprime mortgages made banks reluctant to lend.

“It’s comforting to see financial institutions going this far to help the credit market,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. “This helps traders shift their focus to high-yielding and commodity currencies. The market is gradually returning to the carry trade.”

The yen may fall to 167.10 against the euro today, he said. It last traded at 166.70 per euro from 166.75.

Japan’s benchmark rate of 0.5 percent is the lowest among major economies. The Swiss franc is another popular source for funding higher-yielding investments as the country’s central bank rate is 2.75 percent, lower than the European Central Bank’s 4 percent.

Citigroup Inc. cut its forecasts for the yen and Swiss franc as rising stocks and lower volatility spur carry trades. The yen will trade at 114 against the dollar by year-end, compared with a previous forecast of 112, the bank wrote in a research note published Oct. 12. Japan’s Nikkei 225 Stock Average rose 0.2 percent.

Economic Risks

Any gains in the dollar may be limited on speculation a Commerce Department report Oct. 17 will show U.S. builders broke ground on the fewest houses in 12 years in September. Housing starts fell 3.6 percent to an annual rate of 1.285 million, according to a Bloomberg News survey.

“The underlying trend for the dollar is for it to remain under pressure,” said Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “The economic risks for the U.S. are skewed to the downside.”

The dollar may fall to $1.42 per euro and 117.20 yen today, Morriss forecast.