By Ye Xie and Kim-Mai Cutler Oct. 17 (Bloomberg) -- The yen headed for its first weekly drop against the euro in a month as a rally in U.S. stocks encouraged investors to buy higher-yielding assets funded by low-cost loans in Japan's currency. South Korea's won rebounded today, following the biggest drop in a decade, on speculation the government will prop up confidence in financial markets. ``Those people who kept their powder dry may find it's not a bad opportunity to get into the carry trade again,'' said Dave Floyd, global head of foreign-exchange research and trading in Bend, Oregon, at Aspen Trading Group, a research and trading firm. ``The lack of downward momentum in yen crosses suggests we are in a transitional phase from higher volatility to relatively low volatility.'' The yen fell 1.2 percent to 136.63 against the euro this week, from 134.96 on Oct. 10, and was up 0.1 percent at 11:23 a.m. in New York. The yen dropped 0.7 percent to 101.40 against the dollar this week from 100.67. The euro increased 0.4 percent to $1.3456, from $1.3408, and was little changed today. South Korea's won rose 2.9 percent today to 1,333.90 per dollar, following a 9.8 percent decline. The Bank of Korea said it will trade directly with banks in the swaps market to help boost foreign-currency liquidity. To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Kim-Mai Cutler in London at kcutler@bloomberg.net

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