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Yen Gains on Fears Credit Woes Will Hurt Economic Growth

The yen gained on Tuesday as investors, fearing tougher credit conditions will crimp global economic growth, bought the lower-yielding Japanese currency and sold riskier assets.

The dollar extended declines against the yen after minutes from the Aug. 7 Federal Reserve policy meeting showed the U.S. central bank acknowledged a policy response may be necessary if financial market conditions worsened.

Still analysts cautioned about putting too much emphasis on the Fed report.

"The headline worth highlighting is the one in which they say the Fed may act if financial markets conditions worsen," said Nicholas Bennenbroek, head currency strategist at Wells Fargo in New York.

"But remember, this was before the rout and they did exactly what. They acted. They cut the discount rate and they increased the amount of repos in the markets. The question now is if that response was enough and the answer we are only going to get at their next meeting."

The U.S. dollar changed hands down 1 percent to 114.63 yen.

The euro was little changed by the Fed minutes, still down 0.1 percent to $1.3626 from the previous New York session.