By Catarina Saraiva July 3 (Bloomberg) -- The yen strengthened for a fourth week against the dollar, the longest rally since November, as investors sought a haven on speculation that the economic recovery is slowing. The Japanese currency gained versus 15 of its 16 major peers as U.S. payrolls fell the first time this year and data showed manufacturing weakened in Europe, China and the U.S. The euro rose after the European Central Bank said it would lend the region’s banks less money than economists forecast, fueling optimism the firms are stronger than expected. U.S. service industries likely slipped in June, a report July 6 may show. “The solid performance of the yen was not surprising,” said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York. “A lot of the U.S. numbers have been disappointing this week -- we’re in for slow growth.” The yen gained 1.7 percent to 87.75 per dollar, from 89.23 on June 25. It touched 86.97 yen, its strongest level since December, on July 1. The Japanese currency rose 0.1 percent versus the euro to 110.27 yen. Europe’s shared currency advanced 1.6 percent versus the dollar to $1.2566, touching a six-week high of $1.2612 yesterday. The euro tumbled to the lowest since 2001 versus Japan’s currency on June 29, 107.32 yen, amid concern European banks’ demand for ECB loans when a 12-month facility expired this week would signal weakness in the region’s financial industry. Bank Refinancing The banks needed to repay 442 billion euros ($540 billion) on July 1 under the ECB’s so-called Long-Term Refinancing Operation, the biggest amount it ever awarded and a major part of its effort to contain the financial crisis last year. The central bank reinstated unlimited three-month lending to provide banks with access to cash. European banks on June 30 asked for 131.9 billion ($164.7 billion) in three-month loans, less than economists anticipated. Spain sold 3.5 billion euros of five-year bonds at an auction on July 1, a day after Moody’s Investors Service said it may cut the nation’s credit rating. The notes drew an average yield of 3.657 percent, compared with 3.532 percent at the previous sale on May 6. Advanced economies among the Group of 20 nations meeting in Toronto last weekend agreed to halve deficits by 2013 while providing stimulus to support economic recovery. “We have moved from an environment where growth was supported at any cost, and now we’ve shifted to fiscal responsibility,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. Stocks Tumble Stocks dropped, with the Standard & Poor’s 500 Index falling a second week and closing yesterday at 1,022.58, its lowest close since Sept. 4. The number of jobs outside government rose 83,000, compared with a gain of 110,000 predicted in a Bloomberg survey. The jobless rate unexpectedly fell to 9.5 percent, from 9.7 percent. Orders placed with U.S. factories in May fell 1.4 percent, the most since March 2009, the Commerce Department said. Economists in a Bloomberg survey forecast a drop of 0.5 percent. Pending sales of previously owned houses in the U.S. plunged 30 percent in May, more than double the forecast, National Association of Realtors data showed on July 1. ‘Protracted and Slow’ “The recovery in the private sector is still very slow,” said Samarjit Shankar, a managing director for the foreign- exchange group in Boston at BNY Mellon, the world’s largest custodial bank, with more than $20 trillion in assets under administration. “It might act as a grind on consumer sentiment and spending, and hence the U.S. economic recovery might be very protracted and slow.” The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, declined to 55 in June from 55.4 in May, according to a Bloomberg survey before the group reports the data July 6. U.S. data showed inflation remained muted. The Federal Reserve’s preferred measure of inflation, which tracks consumption excluding food and fuel, was at an annualized 1.3 percent for May, a report showed on June 28, close to the 1.2 percent median estimate of economists in a Bloomberg survey. China’s Purchasing Managers’ Index slowed more than economists forecast in June, falling to 52.1 from 53.9 in May, the Federation of Logistics and Purchasing said in an e-mailed statement. The median forecast in a Bloomberg survey of 59 economists was 53.1. European Manufacturing European manufacturing growth slowed in June, indicating the euro-region recovery may weaken. A gauge of manufacturing in the 16-member euro region declined to 55.6 from 55.8 in the previous month, London-based Markit Economics said on July 1. That was in line with an initial estimate released on June 23. The Swiss franc was the only major currency to outperform the yen this week, gaining against all 16 of its major counterparts. The franc strengthened 1.2 percent to 1.355 per euro, and touched a record high 1.3074 on July 1, as investors sought a haven amid speculation the nation’s central bank wouldn’t try to stem a rise. Swiss National Bank policy makers led by President Philipp Hildebrand on June 17 said deflation risks have “largely disappeared,” ending a 15-month policy of countering what they called “excessive” gains of the franc. --With assistance from Oliver Biggadike in New York. Editors: Greg Storey, James Holloway To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net.

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