The euro dropped for the first time in four days against the dollar and the yen rose as declines by stocks pared investor demand for higher-yielding assets. The yen climbed versus 15 of its 16 most-actively traded peers as Europe’s Dow Jones Stoxx 600 Index fell 1.5 percent and futures on the Standard & Poor’s 500 Index declined. The euro, which climbed the most in almost two months against the dollar on May 8, slid after its 14-day relative strength index approached 70, signaling a change in direction may be imminent. South Korea’s won gained against the dollar and the yen after HSBC Holdings Plc said Asia remains “resilient.” “We’re seeing a consolidation of last week’s gains in risky assets,” said Audrey Childe-Freeman, a senior currency strategist in London with Brown Brothers Harriman Ltd. “Investors are cautious and are trying to assess whether what we have seen is sustainable.” The euro traded at $1.3592 per dollar as of 6:30 a.m. in New York, from $1.3634 at the end of last week. It earlier reached $1.3668, the strongest since March 24. The euro fell to 133.19 yen, from 134.23 yen, after touching 134.82, the highest level since April 7. The U.S. currency was at 97.99 yen, from 98.47 yen. The euro’s 1.8 percent rally on May 8, following a better- than-expected U.S. jobs report, was the strongest since March 18, when the Federal Reserve announced plans to buy Treasuries. The Stoxx 600 index rose 4.6 percent last week, the most since the week ended April 17. Euro ‘Hesitation’ “We had quite a large move in the euro on Friday and now we see a little bit of hesitation to take it higher,” said Paul Robson, a London-based currency strategist at Royal Bank of Scotland Group Plc. “It’s a little correction but we still see the dollar remaining under pressure in the next month.” The common European currency’s 14-day relative strength index was at 63.1 today, from 64.8 at the end of last week. Reports today showed industrial production in France, Italy and Greece in March declined more than economists predicted in Bloomberg surveys. Industrial production in Italy contracted 4.6 percent from February, more than twice the median forecast. Output in France shrank 1.4 percent in March, compared with a prediction for a 0.5 percent drop. The won rose 0.7 percent to 1,237.80 per dollar and 0.2 percent to 12.63964 against the yen. HSBC, Europe’s biggest bank, said the lender made a “resilient start” to 2009, with revenue recovering strongly from the fourth quarter, according to a statement today. Chief Executive Officer Michael Geoghegan said Asia remains a “resilient” market. Carry Trades The yen gained 1.4 percent to 74.64 per Australian dollar, paring a 4.5 percent loss last week, the biggest since the week ended April 3. It fell 27 percent versus South Africa’s rand and 26 percent against the Australian dollar in the past three months as global equity markets rallied, increasing demand for using the Japanese currency to fund investments in higher- yielding assets. Benchmark interest rates in Japan are 0.1 percent, compared with 8.5 percent in South Africa and 3 percent in Australia.

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