(Updates prices, adds fresh quotes, changes byline)
By Toni Vorobyova
LONDON, Aug 31 (Reuters) - High-yielding currencies came back into favour and the yen fell on Friday as news that U.S. President George W. Bush would announce proposals later on Friday to help subprime mortgage borrowers reassured investors.
The yen clawed back ground earlier this week as continuing problems in the subprime mortgage sector pushed investors towards safe haven trades and away from higher-yielding assets.
Market participants were also awaiting a speech by Federal Reserve Chairman Ben Bernanke on housing and monetary policy at 1400 GMT for clues on whether the central bank could cut interest rates soon.
The Fed cut the discount rate earlier this month to cool a crisis in the financial system sparked by problems in the subprime sector.
"News that there would be some announcement made (by Bush) on the measures to support those who have subprime mortgages has probably helped sentiment to some extent and that is seen in the Asian overnight equity performance," said Kamal Sharma, currency strategist at Bank of America.
"The usual patterns apply -- a good equity market day means a negative day for the yen and that's what we have seen."
The dollar rose 0.33 percent to 116.32 yen <JPY=> by 0929 GMT, and the euro rallied 0.60 percent to 159.02 yen <EURJPY=>.
The dollar is trading nearly five yen above 14-month low struck two weeks ago.
The Australian dollar <AUD=> and the New Zealand dollar <NZD=> both added around one percent versus the greenback.
The euro also rose 0.28 percent to $1.3674 <EUR=>. There was little market reaction to euro zone data, showing sentiment dipped slightly in August while inflation held steady.
Sixty-two of 82 economists polled by Reuters see the European Central Bank leaving rates at 4.0 percent next week.
Tokyo's Nikkei share average (.N225: Quote, Profile, Research) climbed more than 2 percent, European bourses gained and U.S. stock index futures were pointing to a stronger open on Wall Street after a senior administration official told Reuters President Bush will outline reforms intended to help homeowners with subprime mortgages avoid default. His statement is scheduled for 1510 GMT.
The correlation with global share prices has been a large factor in currency trading in recent weeks, with investors using stocks as a gauge of risk appetite.
Bernanke reiterated earlier this week that the Fed was "prepared to act as needed" to ensure credit market problems do not adversely affect the economy, fuelling some speculation that the U.S. central bank will lower the funds rate from the current 5.25 percent.
"If he does discuss policy, we would expect him to note that the Fed is trying to improve market liquidity through its recent actions, and we would expect him to keep his options open regarding the possibility of cuts to the federal funds rate by indicating the Fed is continuing to monitor events," Barclays Capital said in a note to clients. The Fed's favourite inflation measure -- personal consumption expenditure -- will also be published at 1230 GMT.