By Catarina Saraiva and Keith Jenkins June 25 (Bloomberg) -- The yen rose for a sixth day versus the euro, the longest since January, on speculation the Group of 20 will fail this weekend to agree on how to tackle Europe’s debt crisis, spurring the haven appeal of the Japanese currency. The dollar and euro extended losses versus the yen after Commerce Department data showed the U.S. economy grew at a 2.7 percent annual rate in the first quarter, less than previously calculated. Australia’s currency fell for a second day against the greenback on waning demand for higher-yielding assets. The British pound pared some of the gains that were spurred by this week’s emergency budget. “This is more risk aversion,” said Jonathan Gencher, director of foreign exchange sales at Bank of Montreal in Toronto. “Coming into the G-20, there are two different schools of thought. You have the U.S., who is still adamant about spending and stimulus, while you have the Europeans, who are talking about austerity. There’s probably going to be nothing achieved. That’s not going to help the euro.” The yen rose 0.5 percent to 110.02 at 8:39 a.m. in New York, from 110.52 yesterday, when it strengthened to 109.54, the strongest since June 10. Japan’s currency appreciated 0.2 percent to 89.48 per dollar, from 89.61 yesterday, when it climbed to 89.23, the highest since May 21. It has gained 1.4 percent this week. The euro fell 0.3 percent to $1.2293, set for a 0.7 percent decline this week. Australia’s dollar slipped 0.1 percent to 86.62 U.S. cents, headed for a 0.7 percent weekly drop. Risk Appetite Falls Japan’s currency strengthened against all of its 16 major counterparts this week as investor appetite for riskier assets diminished. The MSCI World Index of shares fell 0.3 percent today, heading for its biggest weekly decline in a month. The yen is likely to rise against the dollar as Japanese investors slow foreign bond purchases, Deutsche Bank AG said. “While the heavy purchases continued last week, in the most recent week they have slowed significantly,” strategists led by Bilal Hafeez in London wrote in a research report today. “This slowdown in outflows should allow the yen to strengthen.” G-20 leaders meet in Toronto June 26-27 to discuss policies aimed at addressing Europe’s crisis, spurring global growth and overhauling financial regulation. Germany and the U.S. have been at odds on whether to prioritize debt reduction or stimulus, with Chancellor Angela Merkel this week saying Europe’s debt levels have to be reduced because they are one of the main causes of the crisis. The G-20 meeting is also expected to discuss proposals for a global bank levy and a tax on securities transactions to clamp down on financial speculation. Australian Dollar “There’ll probably be some sort of agreement on the bank tax,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “That could be poor for equity markets, so that would be good for safe-haven currencies like the dollar and the yen.” Australia’s dollar headed for a weekly loss before reports next week forecast to show economic and consumer confidence in the U.S. and Europe is waning. Investors should sell the Australian dollar against the yen as risk aversion is likely to increase, according to UBS AG, the world’s second-largest currency trader. UBS said investors should bet the Aussie will fall to 72 yen amid increasing financial-market regulation and “uncertainty” about stress tests on European banks next month. Risk Aversion “All point to risk aversion flaring up in the near term as it did in May,” Gareth Berry, a currency strategist at UBS in Singapore, wrote in an e-mail to Bloomberg. “This will likely hurt commodity currencies, even though the long-term outlook is positive for currencies like the Australian dollar. The yen is likely to be the main beneficiary.” An index of economic sentiment in the 16 euro nations slipped to 98.1 this month from 98.4 in May, according the median forecast of 15 economists in a Bloomberg survey. Over the same period, the U.S. Conference Board’s consumer confidence index declined to 62.5 from 63.3, a separate survey showed. Both reports are due June 29. The U.K. currency slipped to $1.4926 from $1.4935 in New York yesterday, paring weekly gains against the dollar. Sterling reached $1.5012 yesterday, the highest level since May 12, on optimism that measures announced by Chancellor of the Exchequer George Osborne in an emergency budget on June 22 would cut the nation’s deficit and enable Britain to keep its top credit rating. The Swiss franc strengthened to the most against the euro since the single currency’s debut after the central bank said the risk of deflation has largely disappeared. The franc appreciated as much as 0.7 percent to 1.3508 per euro before trading 0.5 percent stronger at 1.3525 per euro. --With assistance from Yasuhiko Seki in Tokyo, Frances Yoon in Seoul and Matthew Brown in London. Editors: Greg Storey, Keith Campbell %USD %EUR %JPY %GBP %AUD %NZD To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net. To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net.

Source