By Yoshiaki Nohara and Ron Harui May 27 (Bloomberg) -- The yen fell against the euro, ending a three-day rally, as signs Asia-Pacific economies are gathering momentum damped demand for safer assets. Japan’s currency weakened against all 16 major counterparts after New Zealand posted its first annual trade surplus since 2002 and Japanese exports grew for a fifth month in April. The euro climbed against the dollar amid speculation Europe’s debt crisis had triggered excessive declines in the 16-nation currency. South Korea’s won gained for the first time in three days after the central bank forecast a $2.5 billion current-account surplus for May. “The Asia-Pacific seems to be recovering faster than other regions,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. “The yen may be sold.” The yen declined to 110.54 per euro as of 6:40 a.m. in London from 109.47 in New York yesterday. Japan’s currency rose to 108.84 against the euro on May 25, the highest since November 2001. The yen weakened to 90.17 per dollar from 89.92. The euro climbed to $1.2260 from $1.2178, after dropping to $1.2144 on May 19, the lowest level since April 2006. New Zealand’s trade surplus widened as imports of crude oil and machinery declined and rising commodity prices kept exports near record levels. The surplus increased to NZ$656 million ($438 million) from NZ$590 million in March, Statistics New Zealand said. The nation posted a NZ$161 million surplus in the year ended April, the first since the 12 months to July 2002. Trade ‘Positive’ “The first annual trade surplus since July 2002 -- it’s export-led, it’s all the stuff we’ve been talking about as far as the recovery goes,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. The trade data is “underlyingly positive” for the New Zealand dollar, he said. New Zealand’s dollar gained 0.9 percent to 66.89 U.S. cents, and advanced 1.2 percent to 60.31 yen. Japan’s exports rose 40.4 percent from a year earlier, after gaining 43.5 percent in March, the Finance Ministry said. Economists forecast a 38.3 percent gain, according to a Bloomberg News survey. “Money is heading into Asia, where economic growth is more robust than in Europe or the U.S.,” said Susumu Kato, chief economist in Tokyo at Credit Agricole CIB and CLSA. “Japan’s exports to Asia have come back quite a bit, as today’s data showed. Cross currencies are rising against the yen.” The yen also fell after a government report showed Japanese investors bought the largest amount of foreign bonds in eight months. Japanese Investors Japanese investors bought 1.0448 trillion yen ($11.6 billion) more in overseas bonds and notes than they sold during the week ended May 21, according to data based on reports from designated major investors released by the Ministry of Finance in Tokyo. That was the most since the week ended Sept. 11, 2009. The euro rebounded versus the dollar as the 14-day relative strength index for the pair fell to around 34, close to the 30 threshold that some traders see as a sign an asset is poised to reverse course. “When the market runs out of negative factors on the euro, investors are compelled to close short positions rather than making new ones,” said Toshiya Yamauchi, a senior foreign- exchange analyst at the online currency-trading company Ueda Harlow Ltd. A short position is a bet that an asset will fall. Net Shorts Futures traders reduced their bets the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed last week. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 107,143 on May 18, compared with net shorts of 113,890 a week earlier. The euro has lost 7.6 percent this year, based on Bloomberg Correlation-Weighted Indexes. The dollar is up 9.8 percent, and the yen has advanced 13.7 percent. South Korea’s won strengthened after the Bank of Korea reported a $1.49 billion surplus for April and forecast inflows for this month will be the highest since November. The won has tumbled 9.5 percent this month, the worst performance among Asia’s 10 most-active currencies, as South Korea blamed the North for sinking one of its warships in March and called for sanctions against its communist neighbor to be stepped up. “Markets don’t move in a straight line and strong data does underpin the stronger fundamentals for Asia,” said Robert Reilly, co-head of Asian fixed income and currencies flow business in Hong Kong at Societe Generale SA. “We expect the pressure to continue on Asian currencies while the concerns in Europe of sovereign debt and fears of contagion exist.” South Korea’s currency rose 2.2 percent to 1,225.35 per dollar, according to data compiled by Bloomberg. It slid to a 10-month low of 1,277.85 on May 25, after a defector group reported North Korea’s military was ordered to prepare for combat last week. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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