By Kim-Mai Cutler Oct. 16 (Bloomberg) -- The yen declined against the euro and dollar as U.S. stock-index futures rose, prompting investors to curb sales of higher-yielding assets funded in Japan. The yen reversed gains from a three-year low against the euro as futures on the Standard & Poor's 500 Index advanced following its biggest plunge since the 1987 stock-market crash. The dollar rose toward its strongest level in more than a year versus the euro on speculation turmoil in financial markets, sparked by the global credit crisis, will encourage investors to buy U.S. Treasuries. ``The yen's very closely following global equities,'' said Lee Hardman, a London-based currency strategist for Bank of Tokyo-Mitsubishi. ``The moves we've seen in the yen over the last month have been extreme and in the near term there is a potential for the currency to weaken.'' The yen traded at 135.01 per euro at 10:41 a.m. in London from 134.93 late yesterday in New York. It had risen to 133.38 earlier. The dollar advanced to $1.3471 per euro from $1.3499. It reached $1.3259 on Oct. 10, the strongest since March 2007. The dollar rose to 100.49 yen from 99.96 yen. The Japanese currency fell against the euro as S&P 500 futures expiring in December added 0.5 percent. The yen weakened on speculation that investors will slow carry-trade reversals. A carry trade is a strategy in which an investor obtains funds in a country with low borrowing costs and buys assets where returns are higher. `Safe-Haven Assets' The yen has gained 5.4 percent against the dollar and 9.5 percent against the euro this quarter as investors reversed such trades and bought yen to repay loans. Japan's 0.5 percent benchmark rate compares with 3.75 percent in Europe, 6 percent in Australia and 7.5 percent in New Zealand. The dollar rose against the euro and the yen today on speculation a Treasury Department report will show international investors increased purchases of U.S. assets in August. ``People are buying safe-haven assets such as Treasuries because of fears over the financial-markets turmoil,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``It's positive for the dollar.'' Foreign investors increased their purchases of U.S. assets in August to $30 billion, from $6.1 billion in July, according to a Bloomberg News survey of economists. The Treasury Department will release the data at 9 a.m. in Washington. Financial Bailout The dollar rose to the highest level versus the euro since March 2007 on Oct. 10, partly as banks' reluctance to lend to each other spurred a surge in demand for U.S. currency funding in global money markets. The U.S. Treasury announced on Oct. 14 a plan to inject $250 billion into financial institutions, a day after European governments committed $1.8 trillion to guarantee loans and invest in lenders. The South Korean won fell 9.7 percent to 1,372 per dollar after Standard & Poor's said it may cut the credit ratings of Kookmin Bank and six other Korean financial companies on concern they will have difficulty refinancing maturing debts. That's the biggest drop since South Korea was bailed out by the International Monetary Fund in December 1997. To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net

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