By Stanley White Oct. 27 (Bloomberg) -- The yen climbed for a fifth day against the dollar as the risk of a global recession and an extended slump in the world's stock markets prompted investors to slash carry trades. The currency rose against the Australian and New Zealand dollars, two favorite targets of the trades, in which investors borrow in nations with low interest rates and buy higher-yielding assets elsewhere. It stayed higher as the Group of Seven nations expressed concern about excessive yen movements and Japan Finance Minister Shoichi Nakagawa said his country is ready to act. ``The yen has further to rise,'' said Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``Higher-yielding currencies are falling apart. The global economy is in trouble and the yen looks relatively attractive because Japan isn't as damaged as other countries.'' The yen rose to 94.23 per dollar as of 12:50 p.m. in Tokyo, from 94.32 in New York on Oct. 24. It touched a 13-year high of 90.93 on Oct. 24. Japan's currency strengthened to 118.78 per euro from 118.96 at the end of last week, when it reached 113.81, the strongest level since May 2002. The euro fell to $1.2606 from $1.2623. The yen may appreciate to around 90 per dollar today, Amikura forecast. Monthly Gains Japan's currency has jumped this month by 13 percent against the greenback, 26 percent versus the euro, 44 percent against the Australian dollar and 36 percent versus the New Zealand dollar as traders slashed carry trades. Japan's benchmark rate of 0.5 percent compares with 6 percent in Australia and 6.5 percent in New Zealand. The MSCI Asia Pacific Index fell 3.2 percent, extending a three-day, 13 percent retreat. The International Monetary Fund will lend Ukraine $16.5 billion and give Hungary ``a substantial financing package'' as the turmoil in global credit markets sweeps across eastern Europe's emerging markets. The yen, which has gained this year against all of some 170 other currencies tracked by Bloomberg, pared gains on speculation central banks may sell the currency to check its advance. ``We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability,'' the G-7 said in a statement read by Japan's Nakagawa. Japan urged the G-7 to issue the statement, he said. Japan last sold its own currency in March 2004. The G-7 is comprised of Canada, France, Germany, Italy, Japan, the U.K. and the U.S. ``The yen's lackluster response is likely because the G-7 stopped short of saying they're ready to conduct actual intervention,'' said Akio Shimizu, chief manager of foreign exchange trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. ``Officials are clearly worried about an overshoot in currencies. Policy makers may also need to prop up stocks to calm financial markets.'' Currency Intervention Australia's central bank bought its currency for a second day. Central banks intervene in foreign-exchange markets when they arrange purchases and sales of currencies. The central bank ``provided more liquidity to the foreign- exchange market,'' said a spokesman for the Sydney-based RBA, who declined to be identified. The intervention came amid similar circumstances to those during a sale of Australian dollars on Oct. 24, according to the spokesman. ``Traders may hesitate to buy the yen from here,'' said Tsutomu Soma, a bond and currency dealer in Tokyo at Okasan Securities Co., Japan's fifth-largest broker by revenue. ``Other central banks were surely aware that the RBA intervened. We can't rule out further intervention to stabilize currencies.'' Volatility implied by dollar-yen options expiring in one month, a measure of expectations for future currency moves, rose to 36.42 percent from 35.38 percent on Oct. 24, when it reached 41.79 percent, the highest since Bloomberg began compiling data in December 1995. ``The way the market has been recently, intervention could happen at any moment,'' said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co. ``That's making some people wary about chasing the yen higher.'' Currency Futures Futures traders increased their bets that the yen will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- rose to 30,121 on Oct. 21, compared with net longs of 29,904 a week earlier. The dollar also fell against the yen as traders increased bets the Federal Reserve may lower interest rates this week before data that may show the world's largest economy shrank the most since 2001. Futures on the Chicago Board of Trade showed a 100 percent chance the Fed will cut its 1.5 percent target rate for overnight lending between banks by at least a quarter-percentage point on Oct. 29. Futures showed no chance of lower rates a month ago. U.S. Economy Gross domestic product contracted at a 0.5 percent annual rate from July to September after growing 2.8 percent in the previous quarter, according to the median estimate in a Bloomberg News survey ahead of Commerce Department data due Oct. 30. ``The Fed may be forced to communicate that it's willing to use a zero-interest-rate-policy,'' Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader, wrote in a research note today. ``Weak economic data may cause stocks to fall further and push up the yen.'' To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net

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