The yen appreciated to an eight-month high against the dollar amid concern the U.S. may require additional stimulus measures to boost the economic recovery. Japan’s currency rose against all of its 16 most-traded peers as a report showed U.S. consumer spending and income stagnated in June, adding to signs growth in the world’s largest economy is stalling. The Dollar Index fell for a fifth straight day. Pacific Investment Management Co. said the rate banks pay for dollar loans is falling partly on speculation the Federal Reserve will resume buying bonds. “The dollar is weak in general -- it’s a continuation of the trend we’ve seen develop over the last two months,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. The yen appreciated 0.6 percent to 85.97 per dollar at 9:20 a.m. in New York, from 86.50 yesterday. It touched 85.72, the strongest level since Nov. 27. The currency rose 0.3 percent to 113.62 per euro. The dollar slid to a three-month low versus the euro at $1.3262 before trading 0.3 percent weaker at $1.3213. U.S. consumer purchases were unchanged after a 0.1 percent gain in May that was smaller than previously estimated, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey was for a 0.1 percent increase. Incomes didn’t rise for the first time since September. ‘Weren’t Too Far Off’ “They weren’t too far off expectations,” said Amelia Bourdeau, a currency strategist in Stamford, Connecticut, at UBS AG. “The market is still pretty focused on whether the Fed will move to further quantitative easing.” The yen has appreciated versus all of its major counterparts this year as speculation the global recovery will falter stoked demand for the safest assets. Japanese Finance Minister Yoshihiko Noda told parliament today that currency rates should be determined by financial markets. He said excessive currency fluctuations may hurt the economy, while declining to comment on whether Japan will consider intervening to stem the yen’s appreciation. The yen rallied amid signs the global expansion is slowing. A Commerce Department report due at 10 a.m. may show factory orders decreased 0.5 percent in June, after a 1.4 percent drop in May, according to a separate survey. The Labor Department will report Aug. 6 that the U.S. economy lost jobs for a second consecutive month in July, according to a Bloomberg News survey of economists. Australian Retail Sales Australia’s Bureau of Statistics said retail sales rose 0.2 percent in June, less than the 0.4 percent gain forecast by economists surveyed by Bloomberg. Home-building approvals unexpectedly dropped 3.3 percent, the bureau said. The Aussie dollar dropped against most of its major counterparts as the central bank also kept its benchmark interest rate unchanged for a third month at 4.5 percent. The currency weakened 0.2 percent to 91.20 U.S. cents and dropped 0.9 percent to 78.35 yen. Speculation the U.S. central bank will restart its bond- buying program to support the economy has mounted since Chairman Ben S. Bernanke said on July 21 that “the economic outlook remains unusually uncertain.” Anthony Crescenzi, a money manager at Pimco, said in an e- mail to clients yesterday that the speculation may help reduce the London interbank offered rate, which banks pay for dollar loans. Three-month Libor fell to 0.435 percent, the lowest level since May 12. UBS AG yesterday raised its one-month estimate for the euro to $1.28 from $1.20, citing the possibility that the Fed will purchase more bonds. Rate Bets Futures on the Chicago Mercantile Exchange show a 36 percent chance the Fed will increase its benchmark rate to at least 0.5 percent by its June 2011 meeting, down from 53 percent odds a week earlier. “Markets seem to be assuming that there will be a significant increase to quantitative easing, which puts pressure on the U.S. dollar,” said Robert Ryan, a currency strategist at BNP Paribas SA in Singapore. The Fed’s next policy decision is scheduled for Aug. 10. Central bankers will consider at the whether to use cash the Fed receives when its holdings of mortgage bonds mature to buy new mortgage or Treasury bonds, the Wall Street Journal reported today. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell below its 200-day moving average, reaching 80.469, the lowest level since April 15. ‘Likely to Pick Up’ Bernanke told lawmakers in South Carolina yesterday that consumer spending is “likely to pick up” amid a “moderate” expansion. St. Louis Fed President James Bullard said on July 29 that he expects the “recovery will continue through the fall.” “You have to get a significant downward revision to their forecast that spills over into next year” to get the Federal Open Market Committee to vote for more easing, said Laurence Meyer, a former Fed governor and vice chairman of forecasting firm Macroeconomic Advisors LLC in Washington. “The only thing that could push the committee to ease, or a signal that tightening is even further off, might be a worse- than-expected employment report,” he said. To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net.

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