By Andrew MacAskill and Ron Harui Nov. 17 (Bloomberg) -- The dollar fell against the yen and the euro as stocks dropped before a report likely to show a gauge of manufacturing in New York slid to a record low. The decline against the yen was the dollar's fifth in the past six days. The U.S. has entered a recession that will persist into next year, and economies around the world will follow suit, according to a survey by the National Association for Business Economics. Stocks in Europe declined and Standard & Poor's futures expiring fell for a second day. ``There is a perception that the U.S. economy is more exposed to a slowdown than Japan,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. ``The yen is winning in the battle with the dollar because it is perceived as a greater safe haven.'' The dollar weakened to 96.52 yen as of 7:46 a.m. in New York, from 97.14 at the end of last week. It dropped to $1.2638 per euro, from $1.2605. The yen strengthened to 121.99 per euro, from 122.39. The New York Federal Reserve's general economic index may fall to minus 26.0, from minus 24.6 in October, according to the median forecast of 46 economists in a Bloomberg survey. Readings below zero for the Empire State index signal manufacturing activity is shrinking. The report is scheduled to be released at 8:30 a.m. local time. S&P 500 futures expiring in December slipped 0.9 percent today. The MSCI Word Index of equities declined for a second day, dropping 0.7 percent. Japanese Recession The yen gained even after the Cabinet Office in Tokyo reported that gross domestic product fell at an annualized 0.4 percent pace in the three months ended Sept. 30, after sliding a revised 3.7 percent in the previous period. Economists predicted 0.1 percent growth, a Bloomberg survey showed. ``The implications of the data are positive for the yen,'' said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital, Britain's third-biggest lender. ``A weak economy will feed into risk aversion and this will strengthen the yen.'' Japan's currency may rise to 92 per dollar by year-end, he said. Volatility implied on one-month dollar-yen options climbed to 27.09 percent from 26.63 percent late in New York on Nov. 14, indicating greater exchange-rate fluctuation risks that may erode profit on so-called carry trades and hurt corporate earnings. Canon Inc., the world's largest camera maker, will move its inkjet printer assembly operations from Japan to Thailand in 2010 because the strong yen is hurting profits, the Nikkei English News reported today, without saying where it got the information. Group of 20 The Group of 20 developed and emerging economies, after a summit that ended in Washington on Nov. 15, urged a ``broader policy response'' to the global slump. Losses at financial institutions totaled $964 billion since the start of last year. ``Risk aversion may intensify if there is no more policy action after the G-20,'' Masafumi Yamamoto, head of foreign- exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader, said in a Bloomberg television interview. ``I would expect that the yen will strengthen across the board and the dollar-yen will head lower to as low as 90 yen.'' Australia's dollar, the worst-performing currency since the end of June, may rebound, prices of iPod music players and Big Mac hamburgers are showing. Apple Inc.'s ``Classic'' iPod costs $249 in the U.S. and the equivalent of $220 in Australia, a gap that suggests the so- called Aussie will appreciate as much as 24 percent to 80 U.S. cents by May, according to Tsutomu Komiya, a money manager at Daiwa Asset Management Co. in Tokyo. ``The Australian dollar is too cheap,'' after weakening 32 percent against the U.S. dollar and 38 percent versus the yen this half, said Komiya, who accurately predicted the start of the currency's decline in July. Daiwa owns 3.8 percent of the country's debt, the most among reported holdings. ``The Australian financial system is still healthy. Of course they have problems, but it's better than Japan or the U.S.'' To contact the reporter on this story: Andrew MacAskill in London at amacaskill@bloomberg.net

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