The euro strengthened for the first time in four days against the yen after a report showed German investor confidence in April increased to the highest level in almost two years. The euro also climbed against the South African rand after the ZEW Center for European Economic Research in Mannheim, Germany, said its index of investor and analyst expectations turned positive for the first time in almost two years. The yen fell against all but two of the 16 major currencies on concern data tomorrow will show Japan posted a trade deficit for the fifth time in six months. The euro pared some of its gains as stocks declined. “The ZEW survey was much, much stronger than expected,” said Roberto Mialich, a currency strategist at UniCredit Markets & Investment Banking in Milan. “The first reaction was a spike in the euro but one survey doesn’t change the negative trend.” The euro rose 0.3 percent to 126.84 yen as of 7:42 a.m. in New York, from 126.48 yen yesterday. Against the dollar, it traded at $1.2957, from $1.2921 yesterday, and after reaching $1.2990 earlier. The U.S. currency was at 98.15 yen, from 97.89 yen. The euro rose 0.4 percent to 11.79 rand. The euro will fall as low as $1.27 by the end of the second quarter, Mialich said. The euro climbed from the lowest level in a month against the dollar after the ZEW index rose to 13, from minus 3.5 in March. That’s the highest level since June 2007. Economists expected a gain to 2, according to the median of 35 forecasts in a Bloomberg News survey. ‘Caution’ Required “The result would need to be treated with caution,” Geoffrey Yu, a currency strategist in London at UBS AG, wrote in a note to clients today. “The euro is continuing to suffer from risk aversion and expectations of a major change in ECB policy, largely imposed on the central bank by deteriorating internal and external conditions.” A gauge of German business confidence in April is forecast to be 82.3, close to the lowest level in more than 26 years, the Ifo institute in Munich will probably say on April 24, according to a Bloomberg survey. The yen snapped three days of gains against the euro and the dollar before a government report tomorrow that may show Japan had a trade deficit of 27 billion yen ($275 million) in March, according to a Bloomberg News survey of economists. ‘Unwinding Long Yen’ “There’s a sense the yen has been overbought,” said Toshihiko Sakai, head of trading for foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest bank. “Market participants are probably unwinding long yen positions.” A long position is a bet an asset will gain. The Swedish krona gained against the euro after the Riksbank cut the nation’s benchmark interest rate by half a percentage point to 0.5 percent, less than some analysts predicted, and refrained from buying bonds to revive the economy. The krona strengthened to 11.1500 per euro, from 11.2362 yesterday. Twelve out of 21 economists in a Bloomberg survey forecast the reduction while the rest predicted a bigger cut. “If the prospects for economic activity deteriorate further in relation to the Riksbank’s current forecast, there is a possibility to supplement the regular monetary policy with purchases of government bonds and possibly also mortgage bonds, as is already being done in a number of other countries,” the Stockholm-based central bank said today in a statement. “The markets had definitely priced a more dovish outcome for the meeting,” said Carl Hammer, a senior global macroeconomic analyst in Stockholm at SEB AB. The Canadian dollar strengthened 0.2 percent to 1.2363 per dollar before a meeting today where the Bank of Canada is forecast to keep rates unchanged at 0.5 percent, according to a Bloomberg survey.

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