(Bloomberg) — The yen rose to the highest in almost three weeks against the dollar and the euro after New York-based CIT Group Inc. filed for bankruptcy, boosting demand for Japan’s currency as a shelter from financial turmoil.

The yen climbed after the 101-year-old commercial lender listed $71 billion in assets and $65 billion in debt in its bankruptcy protection, spurring investors to sell higher- yielding assets. The Australian dollar pared earlier losses against the yen and the greenback after Treasurer Wayne Swan said economic growth will be faster than expected and a government report showed house price increases accelerated.

“The collapse of the CIT Group revived credit fears, triggering sell-offs of riskier-assets and higher-yielding assets,” said Masakazu Sato, a foreign-exchange adviser at foreign exchange margin company Gaitameonline Co. “The atmosphere is beginning to resemble the way things were back in autumn last year before Lehman Brothers Holdings Inc. failed.”

The yen bought 89.92 per dollar at 11:19 a.m. in Tokyo from 90.09 in New York on Oct. 30, after earlier touching 89.20, the strongest since Oct. 14. It reached 131.01 per euro, the highest since Oct. 9, before trading at 132.45, from 132.61 in New York. Japan’s currency was at 80.80 per Australian dollar from 81.05 on Oct. 30, after rising to 79.47, the most since Oct. 8.

Australia’s currency fetched 89.86 U.S. cents from 89.97 cents in New York on Oct. 30. New Zealand’s dollar was at 71.57 U.S. cents from 71.81 cents in New York last week.

U.S. stocks fell the most since May last week, with the Standard & Poor’s 500 index dropping 4 percent. The MSCI Asia Pacific Index of regional shares slid 1.8 percent today and the Nikkei 225 Stock Average declined 2.7 percent.

U.S. System Weak

U.S. taxpayers probably won’t recoup much, if any, of the $2.3 billion in government funds that went to CIT Group, Treasury Department spokesman Andrew Williams said in an e- mailed statement after the 101-year-old commercial lender filed for bankruptcy protection.

“The U.S. financial system is far from a perfect health,” said Mitsuru Saito, chief economist in Tokyo at Tokai Tokyo Securities Co. in Tokyo.

Employers in the U.S. cut fewer jobs this month than in September while the unemployment rate rose to 9.9 percent in October, according to the median forecast in a survey of economists. The Labor Department’s report is due Nov. 6.

Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. recession is “nowhere near” an end and the economy’s third-quarter growth rate of 3.5 percent, the first expansion in more than a year, won’t carry into 2010.

Limited Gains

“When we look at if workers can get jobs, if they can work full time, if businesses are able to sell goods they produce, in those terms, we are nowhere near the end of recession” in the U.S., Stiglitz, 66, the former chief economist at the World Bank said on Oct. 31. The U.S. job market is still “in very bad shape.”

Gains in the yen and the dollar were curbed after China’s manufacturing expanded at the fastest pace in 18 months and Australia’s home prices rose in the third quarter, adding to signs the global economy is recovering.

China’s Purchasing Managers’ Index rose to a seasonally adjusted 55.2 in October from 54.3 in September the Federation of Logistics and Purchasing said yesterday in Beijing. An Australian index measuring the weighted average of prices for established houses in the eight capital cities climbed 4.2 percent in the third quarter from the second quarter, the Australian Bureau of Statistics said in Sydney today.

“There is bright news about economies worldwide, as China’s PMI suggests the recovery in the nation’s economy is picking up,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “It’s mildly positive for risk appetite and a negative for the dollar and the yen.”

Australian Economy

Australia’s government also said today the nation’s economy will grow faster than previously expected and the budget deficit will be in line with a previous forecast.

Australia will have a cash deficit in the 12 months ending June 30, 2010, of A$57.7 billion ($51.8 billion), compared with A$57.6 billion forecast in May, Treasurer Wayne Swan told reporters today in Canberra. The economy will grow 1.5 percent compared with a May forecast of a 0.5 percent contraction.

Futures traders decreased their bets that the euro will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop — so-called net longs — was 32,869 on Oct. 27, compared with net longs of 36,033 a week earlier.

Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.

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