By Candice Zachariahs Nov. 4 (Bloomberg) -- Investors should buy one-month options granting the right to sell the euro because the currency may slide more than 7 percent against the yen as money managers lose appetite for higher-yielding assets, UBS AG said. ``We continue to see risk aversion as the dominant theme, with the market yet to fully realize the extent of the economic slowdown to come,'' wrote Geoff Kendrick, a London-based currency strategist with UBS. The euro has weakened 26 percent against the yen in the past three months as the collapse of Lehman Brothers Holdings Inc. froze lending and raised concern that the financial crisis will plunge the global economy into recession. Investors should buy a so-called 25-delta euro put option against the yen with a strike price of 115.75 yen, wrote Kendrick. Delta measures the rate of change in an option's value relative to moves in the underlying currency. The strike price is the rate at which a holder may buy or sell a currency. The euro gained versus the yen for the three days through Oct. 30, advancing nearly 10 percent, on speculation the Bank of Japan would sell yen for the first time in four years to arrest the currency's appreciation. The BOJ reduced its benchmark rate to 0.3 percent on Oct. 31. The euro was 0.6 percent lower at 124.54 yen as of 11:50 a.m. in Tokyo from 125.33 yen yesterday. The currency has weakened 14 percent against the yen over the past month. The European Central Bank will reduce rates to 2.5 percent by the second quarter of 2009 according to the median forecast of 28 economist surveyed by Bloomberg News, to boost the region's slowing economies. The ECB will cut its benchmark 50 basis points to 3.25 percent on Nov. 6, according to the median estimate of 53 economists surveyed by Bloomberg. A basis point is 0.01 percentage point. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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