The yen declined beyond 99 per dollar for the first time in almost four months as stock rose on the prospect of added Chinese economic stimulus, reducing demand for the currency as a refuge from financial turmoil. Japan’s currency weakened against the euro after a government report showed Australia’s economy unexpectedly shrank in the fourth quarter, fueling concern the slowdown in Japan will worsen. The dollar rose against the euro as companies in the U.S. cut more jobs in February than economists forecast, spurring demand for the world’s reserve currency. “We are seeing a slight pullback of risk aversion,” said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world’s largest custodial bank, with more than $23 trillion in assets under administration. “Additional spending in China may further underpin the demand for Asia. This is a glimmer of hope the market is latching onto.” The yen lost 1.2 percent to 99.32 per dollar at 8:25 a.m. in New York, from 98.16 yesterday, reaching 99.49, the weakest level since Nov. 5. The dollar gained 0.1 percent to $1.2544 per euro from $1.2561, after touching $1.2457, the strongest level since Nov. 21. The yen fell to 124.53 per euro from 123.31. Australia’s dollar traded at 63.96 U.S. cents, from 63.78 cents yesterday. The dollar rose against the euro as ADP Employer Services reported today that companies in the U.S. eliminated an estimated 697,000 jobs in February. The median forecast of 26 economists surveyed by Bloomberg was for a reduction of 630,000. Australia’s Economy Australia’s gross domestic product contracted 0.5 percent from the previous three months, the Bureau of Statistics said in Sydney, compared with economists’ estimates for 0.2 percent growth. The GDP figures are “sobering,” Treasurer Wayne Swan said in Canberra after the data was released. The central bank kept the benchmark interest rate at 3.25 percent yesterday, after cutting it by four percentage points since September. Japan’s currency had its worst month in February since 1995 after a government report showed the economy shrank the most since 1974 last quarter and Finance Minister Shoichi Nakagawa quit amid accusations he was drunk at a press conference, eroding confidence in the government. “There’s no doubt that the economy is in its worst state in the postwar period,” Economic and Fiscal Policy Minister Kaoru Yosano said last month in Tokyo. Japan’s economy will shrink 4 percent in the year starting April 1, faster than this year’s projected decline of 2.9 percent, according to the median estimate of 15 economists surveyed by Bloomberg last month. It contracted an annual 12.7 percent in the fourth quarter, a report showed on Feb. 16. Stocks Gain The MSCI World Index of shares rose 0.5 percent, the second gain in 17 days. Futures on the Standard & Poor’s 500 Index advanced 1.7 percent. The U.S. currency advanced for a fourth day against the euro on speculation Dallas Fed President Richard Fisher and Atlanta Fed President Dennis Lockhart will stress today the need to increase financial assistance to the banking system. “The dollar’s strength is a sign of how fragile the sentiment is in the markets today,” said Paul Robson, a currency strategist in London at the Royal Bank of Scotland Group Plc. The euro will fall to $1.235 before the release of the U.S. non-farm payrolls report on March 6, Robson said. Fed Chairman Ben S. Bernanke said yesterday in testimony to the Senate Budget Committee that policy makers may have to expand aid to banks beyond the $700 billion already approved and take other measures even at the cost of soaring fiscal deficits. The Dollar Index, which the ICE uses to track the U.S. currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, rose 0.4 percent to 89.249. Bernanke’s Stance “Bernanke is telling the public that the Fed and the government will act to support the banking system, which is a support for the U.S. dollar,” said Susumu Kato, chief economist in Tokyo at Calyon Securities, a unit of France’s Credit Agricole SA. “Stronger initiatives by the U.S. will be the driving force of currency markets.” The euro fell after a report showed Europe’s services industries contracted at a record pace in February, pushing the economy deeper into its worst recession in more than a decade. The ECB will cut the benchmark refinancing rate by 50 basis points to a record 1.5 percent tomorrow, the lowest since the 16-member currency was introduced in 1999, according to the median estimate of 55 analysts in a Bloomberg survey. Eastern Europe The euro was also weighed down by concern eastern European countries may default on their debt, reducing investor demand for the currency, according to Standard Chartered Bank. Hungary this week had its outlook cut to “negative” by Fitch and Standard & Poor’s lowered the credit ratings of Ukraine and Latvia last week. “Emerging Europe’s crisis poses clear and present dangers to the euro zone,” Manik Narain, an emerging-markets currency strategist in London at Standard Chartered, wrote in a research note today. “We expect emerging European currencies to remain under pressure over the next six months.” The Polish zloty rose 0.8 percent to 3.7699 against the dollar. The Hungarian forint declined 1 percent to 247.24. To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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