By Ye Xie and Michael J. Moore Dec. 8 (Bloomberg) -- The yen and the dollar fell the most against the euro in two weeks as U.S. President-elect Barack Obama’s pledge to spend more on the nation’s infrastructure boosted stocks and reduced the currencies’ haven appeal. Japan’s yen also slid against the Swedish krona and the Australian dollar as U.S. lawmakers neared an agreement on bridge loans for General Motors Corp. and Chrysler LLC, prompting speculation investors will unwind carry trades at a slower pace. Norway’s krone and South Africa’s rand rose versus the dollar as investors sought higher-yielding assets. “We are seeing a strong return to risk appetite,” said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada’s biggest bank by assets. “The yen is under pressure.” The yen weakened 1.8 percent to 120.40 per euro at 11:02 a.m. in New York, from 118.18 on Dec. 5. It dropped as much as 2.3 percent, the biggest intraday decline since Nov. 24. The yen fell 0.3 percent to 93.09 against the dollar from 92.83. The euro rose 1.7 percent to $1.29929 from $1.2718, increasing as much as 1.8 percent, the most since Nov. 24. The dollar will trade in a range of $1.25 per euro to $1.30, and the yen will fluctuate from 92 to 96 versus the dollar in the next few weeks, according to Strauss. Weaker Yen Japan’s currency dropped 3.1 percent to 61.94 versus the Australian dollar and 3.4 percent to 11.55 against the krona on speculation investors will unwind at a reduced pace 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 4.25 percent in Australia and 2 percent in Sweden. The Standard & Poor’s 500 Index jumped 3.4 percent, and Europe’s Dow Jones Stoxx 600 Index increased 5.6 percent. The yen traded in the opposite direction of the S&P index more than 90 percent of the time in the past month, data compiled by Bloomberg show. In a television interview yesterday on NBC, Obama reiterated his commitment to the biggest investments in the nation’s infrastructure since President Dwight D. Eisenhower created the interstate highway system a half-century ago. The U.S. president-elect takes office Jan. 20. The U.S. House and Senate will meet this week to debate extending $15 billion in loans to GM and Chrysler as a global recession crimps consumer spending, making it difficult for the automakers to pay their bills. U.S. car companies originally requested $34 billion. ‘Fiscal Stimulus’ “Obama’s talk of more fiscal stimulus is good for risk appetite in the short term, and it also raises the risk of a substantial budget deficit,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “That should take some steam out of the dollar.” The dollar will weaken to $1.35 per euro over the next few months, Osborne said. The dollar gained 21 percent versus the euro and 34 percent against the pound since the end of July as a global economic slowdown prompted U.S. investors to seek dollars for funding and repatriate their overseas investments. In a sign demand for greenback funding may be waning, the London interbank offered rate, or Libor, that banks say they charge each other for one-month loans in the dollar declined to 1.83 percent today, from 4.5 percent two months ago. “There has been a pretty broad-based rise in risky assets,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “That’s a big dollar negative, since the dollar is traded as a risk-aversion currency.” Dollar Index The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 1.6 percent to 85.71 today. It touched 88.463 on Nov. 21, the highest since April 2006. The dollar rally isn’t over, according to David Bloom, the London-based global head of currency strategy at HSBC Plc, Europe’s biggest bank by market value. “I don’t think this financial storm is over, and I think we’ll have another aggressive dollar rally still,” said Bloom in an interview on Bloomberg Radio. “The dollar will continue to strengthen. It is the safety, it is the security that everybody is looking for at the moment.” The cooling global economy is halting the spread of monetary union into eastern Europe and may lead to another year of losses for the Polish zloty, Hungarian forint and Czech koruna, according to Morgan Stanley and UBS AG. The zloty fell 21 percent against the euro since July as Poland headed for its biggest economic slowdown in almost a decade, while Hungary turned to the World Bank, International Monetary Fund and European Union for a bailout as the forint weakened 16 percent. The koruna’s volatility almost tripled as it fell 13 percent. The two-year mandatory trial period before adopting the euro allows swings of no more than 15 percent. To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net

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