Oct. 12 (Bloomberg) -- The yen and the dollar strengthened as stocks declined, weighing on investors' appetite for risk and boosting demand for the perceived safety of the Japanese and U.S. currencies. The dollar advanced versus all but two of its most actively traded peers. The MSCI World Index dropped 0.7 percent, and futures on the Standard & Poor's 500 Index fell 0.6 percent before the release of the minutes of the Federal Open Market Committee's September meeting. The yen approached a 15-year high against the dollar and rose to its strongest this month versus the euro. The 16-nation single currency fell for a second day against the dollar, pulling back from near its strongest level since January. "It's a risk-off day with equities lower, which benefits the yen and the dollar," said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. "We expect the dollar to pare its recent weakness which has been, in our eyes, excessive." The yen strengthened 0.5 percent to 113.27 against the euro as of 6:47 a.m. in New York. It climbed as high as 113.01 per euro earlier today, the most since Sept. 30. The Japanese currency was little changed at 81.99 per dollar, from 82.07 in New York yesterday, when it appreciated to 81.39 per dollar, the strongest level since April 1995. The dollar advanced 0.4 percent to $1.3815 per euro. The 16-nation currency reached $1.4029 on Oct. 7, the most since Jan. 28. 'Recent Strength' "The euro's giving up some recent strength as the market's paring back its expectation of how aggressive the Fed could be at its November meeting," Hardman said. "The price action reinforces our belief that an aggressive form of quantitative easing is nearly fully priced in the markets." The dollar strengthened against high-yielding currencies, including those of Australia and Norway amid concern China's growth will cool as the government boosted reserve requirements for six lenders. The greenback rose 0.4 percent to 98.03 cents per Australian dollar after trading as low as 99.18 cents on Oct. 7, the weakest since Australia's exchange controls ended in 1983. The Norwegian krone fell 0.8 percent to 5.8929 per dollar. A technical indicator suggests the euro's 9 percent gain in the past month has been too rapid, according to Ueda Harlow Ltd. The shared currency's 14-day relative strength index against the dollar fell to 68 today, slipping below 70, a level some traders see as a sign an asset's price is poise to change direction, for the first time since Sept. 27. That snapped the longest stretch above 70 since March 2008. Concern About Risk "Given the euro has gained at a fast pace and reached $1.40, there will be some selling," said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow. "The euro may fall to about $1.35." Fed Vice Chairman Janet Yellen said yesterday that low interest rates may give firms the incentive to engage in excessive risk-taking. Fed Chairman Ben S. Bernanke said on Oct. 4 the central bank's first round of large-scale asset purchases aided the economy and more quantitative easing may help further. "A number of Fed governors have questioned the need for more quantitative easing and there will be somewhat of a debate," said Richard Grace, chief currency strategist in Sydney at Commonwealth Bank of Australia, the nation's largest lender. "The risk is that we see a short-term bounce in the U.S. dollar." New York Fed President William Dudley and Chicago Fed President Charles Evans have voiced support for more purchases, while Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher have said such actions may not work. Dollar Shorts Robert Rennie, head of currency research in Sydney at Westpac Banking Corp. recommended investors take "partial profits" on positions that benefit from a decline in the greenback. Markets risk disappointment "given the level of negativity toward the U.S. dollar," he said.

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