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 93.31 per dollar as of 3:29 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 116.87 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 $1.2525 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, 29 percent versus the euro, 49 percent against the Australian dollar and 39 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 5.9 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 currencies tracked by Bloomberg, pared gains on speculation central banks will 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 comprises Canada, France, Germany, Italy, Japan, the U.K. and the U.S. Currency Intervention ``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.'' 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. Rising Volatility Volatility implied by dollar-yen options expiring in one month, a measure of expectations for future currency moves, rose to 38.54 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.'' The dollar is reasserting its status as the world's reserve currency as investors seek a haven from plunging emerging-market stocks and bonds. The ICE futures exchange's U.S. Dollar Index, which tracks the greenback against the currencies of six major trading partners, soared to a two-year high versus the euro and its strongest in six years against the U.K. pound on Oct. 24. One Way Street The sell-off in emerging markets may ``set the stage'' for bigger gains, says Barclays Capital in London. Demand for the safety of Treasuries is turning the foreign-exchange market into a ``one-way street,'' according to Frankfurt-based Deutsche Bank AG, the world's biggest currency trader. BNP Paribas SA, the most-accurate forecaster in a 2007 Bloomberg survey, says the dollar may return to parity with the euro in coming months. 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 will 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. gross domestic product contracted at a 0.5 percent annual rate in the three months through September, according to the median estimate in a Bloomberg News survey ahead of Commerce Department data due Oct. 30. To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net

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