The yen weakened versus most major counterparts as data showing the Asian economic recovery is gaining traction curbed demand for Japan’s currency as a refuge. The euro held onto its biggest weekly loss since August as European finance chiefs prepare to meet tomorrow amid concern Ireland needs a bailout. The dollar was near a five-week high versus the yen before data forecast to show U.S. retail sales rose for a fourth month. The yen declined as reports showed Japan’s economy expanded faster than economists estimated and New Zealand’s retail sales unexpectedly advanced. “Recoveries of Asia-Pacific countries look very solid,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. “There’s a bias to sell safe- haven currencies such as the yen.” The yen was at 113.13 per euro as of 2:19 p.m. in Tokyo from 113.02 in New York on Nov. 12, when it climbed to 111.05, the strongest level since Sept. 16. The euro was at $1.3680 from $1.3691, after dropping 2.4 percent last week. The dollar climbed to 82.69 yen from 82.53 yen, after reaching 82.80 yen on Nov. 10, the highest since Oct. 7. Japan’s gross domestic product expanded an annualized 3.9 percent in the third quarter, the Cabinet Office said, surpassing the forecast for 2.5 percent growth in a Bloomberg survey. New Zealand’s retail sales, adjusted for inflation, gained 0.7 percent in the third quarter from the second, when they rose 1.5 percent, the government said today. Asia-Pacific Leaders Asia-Pacific leaders meeting yesterday in Japan pledged to take “concrete steps” toward creating a regional free-trade agreement without setting a target for achieving that goal. Their meeting followed an Nov. 11-12 Group of 20 summit in Seoul that “opposed protectionist trade actions” while failing to agree on a remedy for trade and investment distortions. The euro extended three weeks of declines against the British pound after an Ireland Finance Ministry spokesman said in an email late yesterday that “ongoing contacts continue at official level with international colleagues in light of current market conditions.” “Ireland has made no application for external support” and the government is “fully funded till well into 2011,” the spokesman said. The yield difference, or spread, between Irish 10-year securities and comparable bunds reached 652 basis points last week, the highest ever. The spread between 10-year Portuguese notes and bunds rose to a record 484 basis points on Nov. 11. The euro slid to 84.906 British pence from 84.975 on Nov. 12. ‘Find Faults’ “It’s easy to find faults about the euro when you think of bailout risks for some nations,” said Kazuyuki Kato, treasury department manager in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-biggest bank. “People want to buy back the dollar, and selling the euro against it is an easy option.” U.S. retail sales gained 0.7 percent in October after rising 0.6 percent in September, according to the median estimate of economists in a Bloomberg News survey before today’s data. “The U.S. economy is certainly recovering, albeit very mildly,” said Kazuo Kitazawa, Tokyo-based director of fixed income at Credit Suisse Group AG. “U.S. consumer prices and retail sales are more likely to be strong, which will possibly lift U.S. bond yields even higher and spur buying of dollars.” Benchmark 10-year yields increased one basis point to 2.79 percent, according to BGCantor Market Data. They earlier touched 2.82 percent, the highest since Sept. 13. ‘True Test’ Federal Reserve Bank of Richmond President Jeffrey Lacker said the central bank may need to tighten monetary policy even with the U.S. unemployment rate elevated to avoid a surge in inflation similar to the 1970s. “At some point in the not-too-distant future, we are likely to face an economy growing in a self-sustaining way while the unemployment rate is still relatively high by historical standards,” Lacker said yesterday in a speech in Richmond, Virginia. “The decisions we make at that time will be the true test of whether we’ve learned our lessons.” The Fed on Nov. 3 said it would buy an additional $600 billion of Treasuries through June, expanding record stimulus to try to reduce 9.6 percent unemployment and keep inflation from dropping. The New Zealand dollar fell as Prime Minister John Key said it was overvalued against the U.S. dollar. New Zealand’s dollar is too strong relative to the greenback, Key said today. The kiwi has gained 6.6 percent against the dollar so far this year. “There is no question that for those who are exporting in U.S. dollars that are not commodity-linked, it’s very difficult to combat the U.S.-New Zealand exchange rate, which is overvalued,” Key told reporters in Wellington today. New Zealand’s dollar fell 0.4 percent to 77.03 U.S. cents and earlier reached 76.84 cents, the least since Nov. 2. The currency declined 0.2 percent to 63.69 yen. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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