The yen and dollar rose against the euro as global stocks fell on concern the U.S. economic stimulus and the financial recovery plan will fall short, boosting demand for the currencies as havens from financial turmoil. The euro fell for a third day against the yen after a report showed industrial output in the 16-nation region declined in December by the most on record, giving the central bank more room to cut interest rates. The dollar pared its loss versus the yen after a report showed U.S. retail sales unexpectedly rose. “There’s a general negative tone blowing through the market,” said Paul Robson, a London-based currency strategist at Royal Bank of Scotland Group Plc. “The relief rally has been short-lived and ended with the disappointment.” The yen appreciated 0.5 percent to 116.04 per euro at 8:34 a.m. in New York, from 116.66 yesterday. The dollar gained 0.3 percent to $1.2871 per euro from $1.2906. The U.S. currency fell 0.2 percent to 90.22 yen from 90.40. The MSCI World Index dropped for a third day, losing 1 percent, and Europe’s Dow Jones Stoxx 600 Index declined 1.8 percent. U.S. stock-index futures fell. “Risk appetite remains shaken,” Steven Pearson, a strategist in London at Merrill Lynch & Co., wrote in a note today. Retail sales increased 1 percent in January, breaking the longest string of declines on record, the Commerce Department reported today in Washington. The median forecast of 72 economists surveyed by Bloomberg News was for a 0.8 percent decrease after a 3 percent drop in the previous month. Geithner on Bailout Treasury Secretary Timothy Geithner, speaking yesterday before the Senate Budget Committee, defended his strategy of taking time to work out the details of a plan to shore up the financial industry. “I completely understand the desire for details and commitments,” he said. “But we’re going to do this carefully.” U.S. lawmakers agreed yesterday on a $789 billion economic stimulus plan, trimming the measure from more than $800 billion. Congress will send the stimulus package to President Barack Obama as early as today, Senate Majority Leader Harry Reid said. Industrial output in the euro region fell 12 percent from a year earlier, the European Union’s statistics office said today in Luxembourg. The decline was larger than the 9.5 percent drop forecast by economists in a Bloomberg survey and the biggest since the data series began in 1986. European Inflation The euro fell against the dollar as the European Central Bank cut its inflation outlook in 2010 to 1.6 percent from 2 percent, stoking speculation policy makers will lower its main refinancing rate to a record. The bank also reduced its 2010 growth outlook to 0.6 percent from 1.4 percent. “The report may heighten expectations for an ECB rate reduction,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. Investors added to bets the ECB will lower borrowing costs from 2 percent at its March 5 meeting. The yield on the three- month Euribor interest rate futures contract due in March fell to 1.70 percent today from 1.715 percent yesterday. ECB council member Erkki Liikanen said policy makers may cut the rate at their March meeting, Helsinki-based financial news Web site Taloussanomat.fi reported. Group of Seven “Inflation developments and expectations are in line with our price stability target,” Liikanen said. “This gives us room to continue to take measures, and it’s possible we’ll move in the next meeting.” The Group of Seven industrialized nations will meet this weekend in Rome to discuss measures to stabilize the financial system. Finance ministers and central bankers are likely to seek assurances the global recession won’t spark a wave of protectionism that deepens the slump, according to Marco Annunziata, chief economist at UniCredit MIB in London. The G-7 may reinstate a call for China to increase the flexibility of its currency, Makoto Utsumi, a former top currency official at Japan’s Finance Ministry, said last week. “The yuan may be singled out,” he said.

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