The yen and dollar fell against most major peers as stocks rose before data forecast to show German exports and U.K. producer prices increased, adding to signs the global recovery is gaining momentum. The yen extended a fourth weekly drop versus the euro, the longest losing streak in 20 months, as quickening growth elsewhere in the world contrasted with Japan’s efforts to rebuild after last month’s record earthquake. The euro reached the strongest versus the dollar since January 2010 on speculation the European Central Bank will raise interest rates further after yesterday’s increase. “Improved risk sentiment on the back of the global recovery is pushing the euro higher against the yen and dollar, especially now the market is convinced there will be further rate increases by the ECB,” said Hitoshi Asaoka, senior strategist at Mizuho Trust & Banking Co. in Tokyo, a unit of Japan’s second-largest bank. The yen declined to 122.45 per euro as of 6:47 a.m. in London from 121.49 yesterday in New York, after touching 122.64, the weakest since May 5, 2009. It has depreciated 2.3 percent this week. The yen dropped 0.2 percent to 85.10 per dollar. The euro advanced to $1.4393 from $1.4308, after earlier climbing to $1.4404, the highest since Jan. 19, 2010. The Dollar Index, which tracks the greenback versus the currencies of six major trading partners, including the pound and Canadian dollar, sank to as low as 75.184, the least since December 2009. German, U.K. Data Japan’s currency has weakened 5.5 percent in the past month, the biggest drop among the 10 currencies tracked by Bloomberg Correlation-Weighted Indexes, spurred by signs economies around the world are picking up. German exports rose 2 percent in February from the previous month, when they dropped 1 percent, according to a Bloomberg survey of economists. U.K. producer prices increased 0.6 percent in March from February, when they gained 0.5 percent, a separate survey showed. Both reports are due today. “Sentiment is still ‘risk on,’ given that nothing has changed” to the outlook for global growth, said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The bias is for the yen to be sold.” The MSCI Asia Pacific Index of regional shares advanced 0.8 percent, extending its third weekly gain to 5.6 percent. ECB Rates The euro touched an 11-month high against the yen on prospects the ECB will raise interest rates further while the Bank of Japan maintains an accommodative monetary policy. The ECB yesterday boosted its key rate by 25 basis points to 1.25 percent to curb inflation, which accelerated to the fastest in two years last month. It will boost the rate by 133 basis points over the next 12 months, compared with a prediction for 44 basis points of increases at the end of last year, a Credit Suisse Group AG index based on swaps showed. “We will continue to do in the future” what is appropriate “to ensure price stability,” ECB President Jean- Claude Trichet said in Frankfurt yesterday. Morgan Stanley recommended investors buy the euro at 121.75 yen, with a target of 130 yen and an automatic instruction to sell the currency should it weaken beyond the 118.80 yen level. Long Euro-Yen “On the back of Trichet’s continued hawkish tones, we add a long euro-yen position,” New York-based currency strategist Yilin Nie and Hong Kong-based currency strategist Yee-Wai Chong wrote in a note yesterday. “Relative to the ECB, the BOJ is at the opposite end of the spectrum, having just announced more easing measures at their recent meeting.” The BOJ yesterday unveiled a 1 trillion yen ($12 billion) one-year loan program to companies affected by the March 11 quake and tsunami. Board members downgraded their economic assessment for the first time since October. Traders boosted bets on the amount of interest rate increases by the Reserve Bank of Australia over the next 12 months to 30 basis points, from 18 basis points at the end of last week, according to a Credit Suisse index. “Any dips in Aussie and kiwi are going to be quite shallow because these remain the most attractive currencies to put on carry trades,” said Todd Elmer, the Singapore-based head of Group-of-10 currency strategy for Asia ex-Japan at Citigroup Inc. “We’re likely to see significant appreciation in these currencies, which for Aussie should take us up toward $1.10.” Australia’s dollar gained 0.5 percent to $1.0518, after earlier rising to $1.0534, the highest since it was freely floated in 1983. To contact the reporters on this story: Monami Yui in Tokyo at myui1@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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