The yen advanced to the strongest since June 1995 against the dollar, and the U.S. currency rose to a six-week high versus the euro as concern the global economy is slowing boosted demand for safer assets. The yen surged to the most since 2001 against the European currency before data forecast to show the U.S. housing market slowed and German business confidence fell. The pound slid to a four-week low after the London-based Times cited Bank of England policy maker Martin Weale as saying the U.K. faces a “real risk” of a second recession. “The yen and the dollar are doing well because the world is doing badly,” said Daragh Maher, deputy head of global foreign-exchange strategy at Credit Agricole Corporate & Investment Bank in London. “We’re seeing a pick-up in safe- haven flows benefiting the two currencies.” Japan’s currency appreciated to 106.11 per euro, the highest since Sept. 24, 2001, before trading at 106.70 at 10:29 a.m. in London from 107.79 in New York yesterday. It advanced to 84.47 per dollar from 85.16, after earlier touching 84.16, the strongest since June 28, 1995. The dollar climbed to $1.2632 per euro, the strongest since July 13, and was later at $1.2626 from $1.2657. The yen has advanced 16 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has dropped 9.3 percent, and the dollar is up 4.3 percent. ‘Continuation of Trend’ “We’re seeing a continuation of the trend in the last few days with increasing fear of a global slowdown,” said Arne Lohmann Rasmussen, head of currency research at Danske Bank A/S in Copenhagen. “The market is testing how far they can take the yen.” The gains accelerated after automatic orders to sell the currency to limit losses were triggered after its strengthened beyond the July 1995 level, he said. Sales of existing U.S. homes dropped 13 percent to a 4.65 million annual rate in July, according to the median estimate of economists in a Bloomberg News survey ahead of the National Association of Realtors report today. U.S. new home sales held at an annual pace of 330,000 in July, according to another Bloomberg survey before tomorrow’s data. German Data The Ifo institute’s German business climate index dropped to 105.7 in August from 106.2 the previous month, a separate survey showed ahead of the data tomorrow. The euro pared declines after it failed to break through $1.2606, the so-called 50 percent Fibonacci retracement of the move from $1.1877 on June 7 to $1.3334 on August 6. If the currency falls beyond $1.26 it may decline to $1.22 within a month, Maher said. The yen tends to strengthen during economic turmoil because investors repatriate funds from overseas and Japan’s trade surplus makes it less reliant on foreign capital. The dollar benefits as the world’s primary reserve currency. The pound fell for a third day versus the dollar after the Times newspaper reported that Weale said the central bank’s latest economic forecasts are “putting a significant chance on the economy contracting over a four-quarter period.” The central bank on Aug. 11 lowered its 2012 growth forecast to 3 percent from 3.6 percent, citing “tight credit conditions” and the government’s planned budget reductions. Britain is facing the deepest spending cuts since World War II and most departments face reductions of a third, according to the independent Institute for Fiscal Studies. “Central bankers are turning dovish,” Mansoor Mohi-uddin, Singapore-based chief currency strategist at UBS AG, wrote in a note today. “Policymaker pessimism is inducing risk aversion again, benefiting the safe-haven dollar, yen and Swiss franc at the expense of the euro, pound and commodity currencies.” The pound declined to $1.5385 from $1.5512 yesterday. Japan’s Nikkei 225 Stock Average slid as much as 1.5 percent to 8,983.52, slipping below 9,000 for the first time since May 2009. The Stoxx Europe 600 Index dropped 1.3 percent. BOJ Pressure The yen’s gains accelerated even after the Sankei newspaper said that Japanese Prime Minister Naoto Kan will today meet with business leaders to discuss the currency’s strength. The paper didn’t name a source for the information. “The BOJ will be pressured to do something as stocks keep falling and the yen continues to gain,” said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “The situation is getting urgent.” Japanese Finance Minister Yoshihiko Noda said to reporters in Tokyo today he will act appropriately in accordance with the Group of Seven statement on currencies, referring to G-7 statements that have said currency movements should reflect economic fundamentals. “Recent movements have clearly been one-sided,” Noda told reporters, referring to the yen’s advances against the dollar and the euro. “As I’ve said before, excessive and disorderly movements in the currency market can have a negative impact on the stability of the economy.” To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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