The yen rose against the euro, erasing an earlier decline, after a government report showing China’s economy expanded at the slowest pace in almost a decade added to concerns the global recession may deepen. The yen also strengthened against 11 of the 16 most-active currencies before U.S. reports today economists say will show home construction slowed and initial claims for jobless benefits increased. The euro approached a two-week low versus the yen on speculation a European Union report today will show the region’s industrial production dropped the most on record, supporting the case for the European Central Bank to lower borrowing costs. “It looks like people who had sold the yen on hopes for better China figures had to buy back the yen to cover their short positions,” said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co., Japan’s fifth-largest bank. “Worries over the global slump will probably persist in the short term.” The yen climbed to 130.65 per euro at 1:48 p.m. in Tokyo from 131.44 in New York yesterday when it reached 129.93, the highest level since April 1. Japan’s currency advanced to 98.95 against the dollar from 99.37. A short position is a bet an asset will decline. The dollar traded at $1.3203 per euro from $1.3227 in New York yesterday. It touched $1.3090 on April 10, the strongest since March 18. The U.S. currency was at $1.4990 versus the British pound from $1.4997. Against the yen, Australia’s dollar fell 0.8 percent to 71.81 and New Zealand’s dollar dropped 1.3 percent to 56.95. The Chinese yuan traded at 6.8314 per dollar in Shanghai from 6.8322 yesterday, according to the China Foreign Exchange Trade System. China’s Economy China’s gross domestic product grew 6.1 percent in the first quarter from a year earlier, the least since December 1999, the statistics bureau said today. The median estimate of economists surveyed by Bloomberg was for 6.2 percent growth. “There are lingering concerns that economies worldwide will take time to emerge from recession,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The yen may be bought. The dollar also is perceived as a ‘safe-haven’ currency and we may see some buying.” U.S. Treasury Secretary Timothy Geithner yesterday refrained from labeling China as a currency manipulator in the department’s first semiannual report on foreign-exchange policies since he became secretary. He backtracked from an assertion he made during his confirmation hearings in January. Euro Weakens The euro fell for a third day against the dollar as economists estimate the European Union’s statistics office in Luxembourg will say today that industrial production fell 18 percent in February from a year earlier, the biggest decline since the data series began in 1986. Investors raised bets that the ECB will reduce rates at its May 7 meeting. The yield on the three-month Euribor interest- rate futures contract for May delivery fell to 1.285 percent yesterday from 1.305 percent on April 14. ECB council member Axel Weber said in Hamburg yesterday the central bank will unveil a package of new measures next month to rescue the economy. “The euro may continue to be weighed by prospects for further rate cuts and unconventional monetary easing policies,” Emmanuel Ng, a Singapore-based economist at Oversea-Chinese Banking Corp., wrote in a research note today. Benchmark interest rates are 1.25 percent in the euro area and 3 percent in Australia and in New Zealand, making assets in the 16-nation region and the South Pacific nations attractive to international investors seeking higher returns. Japan’s benchmark borrowing cost is 0.1 percent and the U.S. rate is between zero and 0.25 percent. Pound Rallies The pound traded close to a three-month high as investors bet the U.K.’s $2.7 trillion economy will be among the first to recover from the global slump. The currency rallied yesterday to $1.50 for the first time in three months, showing financial markets are growing more confident in Gordon Brown even as the U.K. prime minister is yet to benefit in the polls during Britain’s worst recession since 1984. The currency rebounded 2.7 percent versus the dollar this year to as high as $1.5036 yesterday, and strengthened 8.9 percent against the euro. Nationwide polls show Brown’s Labour Party trailed the Conservatives, led by David Cameron, for the past year. “At the margins, it takes a lot of pressure off Gordon,” said Stewart Robertson, an economist at Aviva Investors in London, which manages about $230 billion in assets. “Getting headlines for plummeting currencies off the front pages is good, as there’s less talk of the U.K. being a basket case.”

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