By Oliver Biggadike and Catarina Saraiva June 26 (Bloomberg) -- The yen rose for a third week against the dollar, its longest stretch of gains since January, as U.S. economic data signaling the recovery is sputtering boosted demand for currencies less likely to return a loss. Japan’s currency advanced against all 16 of its most active counterparts, while those of commodity exporters including Canada and Norway were among the worst performers amid speculation the Group of 20 nations will fail to agree this weekend on how to tackle Europe’s debt crisis. Reports next week may show U.S. payrolls shrank and manufacturing growth slowed. “The yen rally can be described as a safe-haven play,” said Hidetoshi Yanagihara, a currency trader in New York at Mizuho Corporate Bank. “The U.S. economy is not performing well. Growth in the second quarter may have slowed more than people had thought, and that’s what the market is trying to price in.” The yen gained 1.7 percent to 89.23 per dollar, from 90.71 yen on June 18, and appreciated 1.8 percent to 110.41 per euro, from 112.40. The euro slipped 0.2 percent to $1.2369, from $1.2388 last week. Australia’s higher-yielding dollar slid 1.4 percent to 78.02 yen, its first decline in three weeks. Implied volatility of the yen’s value against the dollar, a measure of price swings anticipated by options traders over the next month, was 11.52 percent yesterday, 1.6 percentage points lower than the comparable 13.12 percent value for euro-dollar. Volatility in the Swiss franc versus the dollar was the lowest among the Group of 10 currencies at 10.59 percent. The franc was the third-best performer this week among major currencies, trailing sterling. G-20 Summit G-20 leaders meet in Toronto today and tomorrow to discuss policies aimed at addressing Europe’s crisis, spurring global growth and overhauling financial regulation. Germany and the U.S. have been at odds over whether debt reduction or economic stimulus should take precedence, with Chancellor Angela Merkel this week saying Europe’s debt levels have to be reduced because they are one of the main causes of the crisis. “Coming into the G-20, there are two different schools of thought,” said Jonathan Gencher, director of foreign-exchange sales at Bank of Montreal in Toronto. “You have the U.S., who is still adamant about spending and stimulus, while you have the Europeans, who are talking about austerity. There’s probably going to be nothing achieved.” Slower Growth Reports this week showed U.S. new-home sales dropped to a record low annual pace of 300,000 in May, from 446,000 a month earlier, and sales of existing homes unexpectedly fell, decreasing 2.2 percent. The Federal Reserve said in a policy statement on June 23 that the pace of the economic recovery is “likely to be moderate for a time.” Financial conditions have become “less supportive of economic growth on balance, largely reflecting developments abroad,” it said. The central bank held the target interest rate for overnight lending between banks at a record low range of zero to 0.25 percent, where it has been since December 2008 to help spur the economy. It reiterated it intends to keep the rate low for an “extended period.” Job Losses U.S. nonfarm payrolls dropped in June by 110,000 jobs, according to the median forecast in a Bloomberg survey of 51 economists. The Labor Department reports the data July 2. Business activity in the U.S. expanded at a slower pace, slipping to an index reading of 59 from 59.7 in May, a report on June 30 from the Institute for Supply Management-Chicago Inc. may show, according to another survey. The Swiss franc yesterday touched the strongest level against the euro since the single currency’s debut after the central bank said the risk of deflation has largely disappeared. The franc reached 1.3457 per euro. Sterling gained for a third week against the dollar amid optimism an emergency budget announced June 22 by Chancellor of the Exchequer George Osborne would cut the nation’s deficit and enable Britain to keep its top credit rating. The pound rose 1.6 percent to $1.5063. The yuan had its biggest weekly gain since December 2008, rising 0.5 percent to 6.7921 per dollar, after the People’s Bank of China said June 19 it would end a two-year peg to the dollar. President Barack Obama said on June 24 in Washington it’s too soon to say whether China’s move will be sufficient to rebalance the world economy. He and Chinese President Hu Jintao are scheduled to meet at the G-20 summit. --Editors: Greg Storey, James Holloway %USD %EUR %JPY %GBP %AUD %NZD To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net. To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net.

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