The yen advanced from a one-month low against the euro on speculation a decrease in stocks will reduce demand for higher-yielding assets. The euro, which rose the most against the dollar in almost two months on May 8, stalled after its 14-day relative strength index approached 70, signaling a change in direction may be imminent. The Australian dollar fell from the strongest level versus the dollar and yen since October as HSBC Holdings Plc, Europe’s biggest bank, said 2009 will be a “tough” year. “We are seeing some consolidation after Friday’s move,” said Camilla Sutton, a currency strategist at Scotia Capital Inc. in Toronto. “The general theme is still in place. Commodity currencies such as the Australian dollar should outperform, and the dollar and the yen really are the underperformers.” The euro fell 1.1 percent to 132.79 yen at 11:58 a.m. in New York, from 134.23 on May 8, after touching 134.82, the highest level since April 7. The dollar traded at $1.3624 per euro, compared with $1.3634 at the end of last week, after earlier reaching $1.3668, the weakest level since March 24. The U.S. currency dropped 1 percent to 97.47 yen, from 98.47. Australia’s dollar lost 0.7 percent to 76.29 U.S. cents, the first decrease in seven days, after the Standard & Poor’s 500 Index fell 1.7 percent. The Aussie touched 77.14 earlier, the highest level since Oct. 6. Canada’s dollar depreciated 0.8 percent to C$1.1586 after reaching C$1.1477, the strongest since Nov. 5. Aussie’s Gains The Aussie appreciated 18 percent over the past two months while the Canadian dollar rose 10 percent as evidence the worst of the global recession is over encouraged investors to buy currencies of commodity producers that stand to benefit from a recovery. Commodities such as oil and gold account for half of Canada’s exports, and raw materials, including iron ore, make up 70 percent of Australia’s shipments. “The currency markets are clearly pricing in a recovery, reflation story right now,” said Bilal Hafeez, global head of currency strategy in London at Deutsche Bank AG, the world’s largest currency trader, in an interview on Bloomberg Television. “The currencies you want to be in are the ones that are growth-sensitive. For now, you stick with growth trades,” such as the South Korean won and the Canadian, New Zealand and Australian dollars, Hafeez said. The euro’s 1.8 percent rally versus the dollar on May 8, following a better-than-forecast U.S. jobs report, was the strongest since March 18, when the Federal Reserve announced plans to buy up to $300 billion in Treasuries to keep interest rates low and stimulate the economy. Relative Strength The common European currency’s 14-day relative strength index was at 64.31 today, compared with 64.72 at the end of last week. The last time the index was in the middle 60s was after the Fed’s announcement in March. The euro gained 2.7 percent versus the dollar last week, the most since the week ended March 20, on bets the European Central Bank’s plan to buy 60 billion euros ($80.5 billion) in covered bonds isn’t aggressive enough to debase the currency. President Jean-Claude Trichet told reporters in Frankfurt on May 7 the purchase of the debt is a “credit easing.” The dollar tumbled a record 3.4 percent versus the euro on March 18, when the Fed announced its plan to buy government bonds, a policy known as quantitative easing. “In essence, the U.S. is willing to sacrifice the currency in order to retain growth, whereas Europe is much more circumspect,” said Deutsche Bank’s Hafeez. The euro may rise to $1.50 over the next two or three months, Hafeez said. Dollar Index The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, may slump a further 5.7 percent after dropping below the 200-day moving average on May 8, according to Forecast Pte in Singapore. “This is a very strong bearish signal,” said Pak Lai Ng, a technical analyst at Forecast. “It is a corrective move from the major uptrend that began since March 2008.” The index, which tracks the currency versus the yen, euro, pound, Swiss franc, Canadian dollar and Swedish krona, was little changed at 82.55 today, compared with the 200-day moving average of 83.18. It dropped 1.7 percent on May 8, the biggest decrease since the day after the Fed’s decision in March to buy U.S. debt. The yen gained 1.9 percent to 74.27 per Australian dollar after a 4.3 percent loss last week, the biggest decrease since the week ended April 3. The yen earlier touched 76.18, the weakest level since Oct. 6. Japan’s currency rose 2.4 percent to 11.62 against the South African rand. HSBC Charges London-based HSBC said today in a statement that charges for impaired loans rose in all customer groups and regions during the first quarter. In the U.S., where HSBC reported complete first-quarter earnings, provisions rose to $3.95 billion, from $3.19 billion a year earlier. Japan’s currency 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 yen 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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