The yen strengthened against all its 16 most-traded counterparts as global stocks fell and the International Monetary Fund said its 26 billion-euro ($38 billion) loan to Portugal “entails important risks.” The euro slid from a four-week high versus the dollar after German Finance Minister Wolfgang Schaeuble said bondholders must contribute a “substantial” share of a second aid package for Greece. The yen rose to the strongest in a month against the dollar as Federal Reserve Chairman Ben S. Bernanke said the “frustratingly slow” U.S. recovery warrants sustained monetary stimulus. The MSCI World Index declined 0.5 percent. “The yen is up from a risk-aversion standpoint,” said Greg Salvaggio, senior vice president of capital markets at currency- trading firm Tempus Consulting Inc. in Washington. The yen appreciated 0.3 percent to 79.87 per dollar at 11:30 a.m. in New York, from 80.09 yesterday, after touching 79.70, the strongest level since May 5. It strengthened 1.1 percent to 116.38 per euro, from 117.67. “We recommend to our clients be short yen anywhere in the low 80s,” Salvaggio said. “I don’t understand the appeal of Japanese assets and we are going to start selling some yen.” A short position is a bet that an asset will decline in value. The euro declined 0.8 percent to $1.4574 from $1.4691 yesterday, when it reached $1.4697, the most since May 5. Stocks Decline The yen tends to strengthen during economic and financial turmoil because Japan’s historic trade surpluses makes it less reliant on foreign capital. The seven-day relative strength index for the dollar versus the yen dropped to 24.74, the lowest level since May 5. A reading below 30 signals an asset may be due for a rebound. The yen rose for a sixth day against the dollar as Fed officials expressed concern over the world’s largest economy. New York Fed President William Dudley said yesterday in New York that the U.S. recovery from the worst financial crisis since the Great Depression is “distinctly subpar” even after “aggressive monetary and fiscal stimulus.” Kansas City Fed President Thomas Hoenig speaks in Steamboat Springs, Colorado, today. The Fed also releases its regional Beige Book economic survey today. Yen Monitor Japan’s Finance Minister Yoshihiko Noda told reporters in Tokyo yesterday he would closely monitor the yen’s appreciation while conceding that the market’s view on the U.S. economy was likely behind its moves. Group of Seven countries jointly intervened in March after Japan’s currency soared to 76.25, its highest level since World War II, threatening the nation’s recovery from the March 11 earthquake and tsunami. The total size of the G-7 intervention has been estimated at about $25 billion. “The big change in the market mood is what to expect out of the U.S.,” said David Mann, regional head of research for the Americas at Standard Chartered in New York. “It’s reasonable to expect we’re going to test the May low of 79.57 and beyond that the really big level will be 78.90 will be the next big support level.” The Australian dollar and Norwegian krone were the two worst performers against the dollar today as lingering concerns over the U.S. economy damped demand for growth-sensitive currencies. Aussie Drop Australia’s dollar fell to $1.0616 from $1.0721 yesterday. The Aussie dropped to 84.79 yen from 85.87. Norway’s krone fell 1.1 percent to 5.3980 per dollar and declined 0.3 percent to 7.8685 versus the euro. The pound fell against the dollar and the euro after Moody’s Investors Service said the U.K. risks losing its top credit ranking should growth remain weak. It said the outlook on the country’s rating is “stable.” Sterling dropped 0.5 percent against the dollar to $1.6362. “Slower growth combined with weaker-than-expected fiscal consolidation efforts could cause the U.K.’s debt metrics to deteriorate to a point where we would reconsider our stance,” Francesco Meucci, a Moody’s spokesman, said in a phone interview from Paris. The measures attached to the IMF loan to Portugal “may fail to alleviate sovereign debt concerns, with an adverse impact on government financing prospects,” the agency’s staff wrote in a May 17 report that was posted on the fund’s website yesterday. The IMF approved the loan to Portugal on May 20 as part of a joint 78-billion euro bailout with the European Union in the latest effort to stem the region’s sovereign-debt crisis. Schaeuble told European Central Bank President Jean-Claude Trichet and fellow euro finance ministers in a June 6 letter that maturities on Greek bonds should be extended seven years. Any agreement on aid at a ministers’ meeting on June 20 “has to include a clear mandate -- given to Greece possibly together with the IMF -- to initiate the process of involving holders of Greek bonds,” Schaeuble wrote in the letter. To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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