By Ye Xie and Andrew MacAskill Nov. 17 (Bloomberg) -- The yen rose for a second day against the dollar as stocks fell on a slumping global economy, increasing bets investors will sell higher-yielding assets and pay back low-cost loans in Japan. Japan's currency also advanced against the Brazilian real on speculation carry trades will unwind. The U.S. has entered a recession that will persist into next year, and economies around the world will contract, a survey of business economists indicated. ``We are experiencing the economic consequence of the financial shock,'' said Sebastien Galy, a currency strategist at BNP Paribas Securities SA in New York. ``The dollar-yen will be lower. We haven't seen the bottom.'' The dollar dropped 0.3 percent to 96.85 yen at 9:31 a.m. in New York, from 97.14 on Nov. 14. The U.S. currency decreased 0.4 percent to $1.2660 per euro from $1.2605. The yen depreciated 0.1 percent to 122.61 per euro, from 122.39. The U.S. economy will contract 0.2 percent in 2009 after growing 1.4 percent this year, according to the median estimate in a poll of business economists taken by the National Association for Business Economics. A majority of respondents said the U.K., the euro countries, Japan, Canada and Mexico are either now, or will soon be, in a recession. The New York Fed's general economic index fell this month to minus 25.4, the lowest since records began in 2001, from minus 24.6 in October. Readings below zero signal manufacturing in New York State shrank. The dollar pared its losses against the yen and the euro after a separate Fed report showed U.S. industrial production rose in October more than forecast. Drop in Stocks The Standard & Poor's 500 Index slipped 1 percent today. The MSCI Word Index of equities declined for a second day, dropping 0.7 percent. Japan's 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, the Cabinet Office in Tokyo reported. 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.'' The yen may appreciate to 92 per dollar by year-end, he said. The yen gained 2.8 percent to 41.91 against the real on speculation investors will reduce trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.3 percent target lending rate compares with 13.75 percent in Brazil. Volatility implied on one-month dollar-yen options climbed to 27.05 percent from 26.63 percent on Nov. 14, indicating greater exchange-rate fluctuation risks that may erode profit on so-called carry trades and hurt corporate earnings. Canon Profits 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, Nikkei English News reported without saying where it got the information. 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, said head of foreign-exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader, said in an interview on Bloomberg Television. ``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 against the U.S. dollar and the yen since the end of June, may rebound, prices of iPod music players and Big Mac hamburgers indicate. Bargain iPods 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 reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Andrew MacAskill in London at amacaskill@bloomberg.net

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