The yen fell to a five-month low against the euro as U.S. plans to help banks dispose of toxic assets spurred investor appetite for higher-yielding currencies. South Korea’s won, Australia’s dollar and Britain’s pound rose for a third day against the yen on speculation the worst of the global financial turmoil may be over. Treasury Secretary Timothy Geithner announced yesterday a plan to finance as much as $1 trillion in purchases of illiquid bank assets, sapping demand for safety. “Yen weakening is the stream in the market,” said Hidetoshi Yanagihara, a currency trader at Mizuho Corporate Bank in New York. “Everyone seems to take risks again.” Japan’s currency declined 0.8 percent to 133.27 per euro at 10:25 a.m. in New York, from 132.17 yesterday. It touched 134.51, the weakest level since Oct. 21. Japan’s currency lost 1.5 percent to 98.39 per dollar from 96.95. The dollar gained 0.6 percent to $1.3546 per euro from $1.3633. The greenback reached $1.3738 on March 19, the weakest since Jan. 9. The yen may weaken to 100 versus the dollar within the next two days as long as equities advance, Yanagihara predicted. Japan’s currency will appreciate to 95 should yesterday’s rally in U.S. stocks reverse, he said. Japan’s currency slid against all of the 16 most actively traded currencies tracked by Bloomberg on speculation the nation’s investors will buy higher-yielding assets overseas. Japan’s benchmark interest rate is 0.1 percent, compared with 1.5 percent in the euro region and 3.25 percent in Australia. Dollar Index The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners, gained 0.8 percent today to 84.044. The gauge decreased 4.5 percent this month on speculation fewer investors will seek a refuge from global economic turmoil after the Fed said on March 18 it would buy as much as $300 billion of Treasuries and increase purchases of agency mortgage- backed securities. The correlation between the MSCI World equity index and the Dollar Index was minus 0.549 since reaching a low this year of minus 0.574, Bloomberg data show. A reading of minus 1 would mean the dollar and stocks always trade in the opposite direction. “The dollar’s decline of sensitivity to equities could indicate the rally in the euro is running out of steam,” said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto. “The yen is a clearer trade.” Relative Strength The 14-day relative strength index on the 16-nation euro versus the greenback, a gauge used by traders and analysts to project price trends, decreased to 67.8 after holding above 70 for the past four days, a signal the currency’s gain was too fast to sustain. Japan’s currency also declined for a third day against the dollar on speculation a government report tomorrow will show the economy posted a trade deficit for a fifth month, suggesting reduced demand for the nation’s exports. The Finance Ministry may say the custom-cleared trade shortfall was 20 billion yen ($203 million) in February, compared with a record 956.9 billion yen in the previous month, according to a separate Bloomberg survey of economists. The yen fell versus 15 of the 16 major currencies this quarter, dropping the most versus Norway’s krone and Brazil’s real. Against the yen, the krone surged 19 percent to 15.46 and the real climbed 11.6 percent to 43.58. South Korea’s Won South Korea’s won advanced 2 percent today to 14.08 versus the yen, Australia’s dollar climbed 0.5 percent to 68.72 yen and the pound appreciated 2.5 percent to 144.80 yen. The U.K. currency reached 145.09 yen, the highest level since Dec. 1. “Sterling-yen should perform pretty well as long as equities rally and risk appetite improves,” Sharada Selvanathan, a currency strategist in Hong Kong at BNP Paribas, said in an interview. “There could also be some flows leaving Japan as investors look outside for investment opportunities.” The Nikkei 225 Stock Average rose 3.3 percent, its sixth gain in seven days, and the MSCI World Index advanced 0.4 percent. The Standard & Poor’s 500 Index fell 1.5 percent after rallying 7.1 percent yesterday. The pound appreciated as much as 1.4 percent to $1.4778 per pound, the highest level since Feb. 10, as an Office for National Statistics report showed annual consumer inflation unexpectedly accelerated last month. Consumer prices climbed 3.2 percent from a year earlier, compared with 3 percent in January. The median forecast of 28 economists surveyed by Bloomberg was for a 2.6 percent pace. ECB’s Stance Demand for the euro may weaken after European Central Bank President Jean-Claude Trichet said the main refinancing rate may be cut further as the bank works to counter the global economic slump, according to analysts. “Our main policy rates are not at their lowest level and they could diminish further,” Trichet said in a speech yesterday in Mexico City. “The currency looks to be hostage to potential downside risks,” said Yasuhide Yajima, senior economist in Tokyo at NLI Research Institute Ltd., a unit of Japan’s second-largest life insurer. “Given the fragile banking system in Europe and the recession, the ECB may need to ease monetary policy further, boding ill for the euro.”

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