By Yasuhiko Seki and Ron Harui July 29 (Bloomberg) -- The yen and the dollar rose versus the euro before a report economists said will show orders for durable goods in the U.S. fell last month, curbing demand for higher-yielding assets. The Japanese currency also advanced amid speculation domestic investors are repatriating earnings. The Australian dollar fell from near its strongest level this year against the greenback and South Korea’s won ended a two-day advance as Asian stocks declined. “I’m skeptical about the sustainability of a steady improvement of the economy,” said Takeshi Makita, a Tokyo-based economist at Japan Research Institute Ltd., a unit of Japan’s third-largest banking group Sumitomo Mitsui Financial Group Inc. “When the economy is on the downhill and stocks are falling, the yen strengthens against higher-yielding currencies.” The yen traded at 133.37 yen at 7:08 a.m. in London from 133.95 yen yesterday in New York. The yen was at 94.18 yen from 94.55 yesterday, extending its advance this month to 2 percent. The euro bought $1.4157 from $1.4167 yesterday. The 16-nation currency traded in July in a range of $1.3833 to yesterday’s high of $1.4304, the strongest level since June 3. Australia’s currency fell to 82.25 U.S. cents from 82.69 cents in New York yesterday, when it rose to 83.38 cents, the most since Sept. 29. ‘Painfully Slow’ The yen rose against all of its 16 major counterparts tracked by Bloomberg on forecasts that U.S. orders for durable goods last month fell 0.6 percent, the first retreat in three months, according to a Bloomberg News survey of economists. The Commerce Department releases the data today. Adding to the global gloom, retail sales in Japan slid 3.0 percent from a year earlier following a 2.8 percent drop in May, the Trade Ministry said today in Tokyo. Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. economy’s expected recovery is likely to be “painfully slow” as consumers spend less and save more. She also said the U.S. is showing the “first solid signs” of emerging from recession. “A gradual recovery means that things won’t feel very good for some time to come,” Yellen said in a speech in Coeur d’Alene, Idaho. Demand for the yen also rose amid speculation Japanese investors will bring back funds from redemption payments on 18 billion euros ($25.5 billion) in European government bonds maturing tomorrow, according to RBC Capital Markets. “Talk of sizeable eurobond redemptions are weighing on the euro-yen,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. The Japanese currency also advanced after a car bomb explosion in the Spanish city of Burgos today injured 36 people, according to a government official on local radio. Spain Bombing The Japanese currency extended its advance against the 16- nation currency after a car bomb explosion in the Spanish city of Burgos today injured 36 people, according to a government official on local radio. “This news strengthened risk-aversion briefly and added to the buying of the yen,” said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale, France’s third- largest bank. The won fell 0.3 percent to 1,239.95 against the dollar as the MSCI Asia Pacific Index of shares snapped its longest winning streak in more than five years after the U.S. Conference Board yesterday reported the consumer confidence index dropped for a second month in July. The Conference Board’s confidence index dropped to 46.6, following a reading of 49.3 in June, the New York-based research group said. “It is negative for Asian exports and a surprise to the market,” Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong, said about the U.S. confidence report. The MSCI Asia Pacific Index fell 0.6 percent today. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net. Ron Harui in Singapore at rharui@bloomberg.net.

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