The yen strengthened against all its 16 most-traded counterparts as 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 way the slow-burning European crisis is impacting the euro itself is every so often when people worry about an immediate near-term extra risk coming through it does weigh on the currency,” said David Mann, regional head of research for the Americas at Standard Chartered in New York. The yen appreciated 0.4 percent to 79.78 per dollar at 8:35 a.m. in New York, from 80.09 yesterday, after touching 79.70, the strongest level since May 5. It strengthened 1 percent to 116.52 per euro, from 117.67. The euro declined 0.6 percent to $1.4604 from $1.4691 yesterday, when it reached $1.4697, the most since May 5. “It’s reasonable to expect we’re going to test the May low of 79.57 for the yen and beyond that the really big level will be 78.90 will be the next big support level,” Mann said. Stocks Decline Futures on the Standard & Poor’s 500 Index declined 0.4 percent, sliding for the sixth day. The yen tends to strengthen during economic and financial turmoil because Japan’s trade surplus makes it less reliant on foreign capital. The seven-day relative strength index for the dollar versus the yen dropped to 23.65, 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. ‘Soft Patch’ “America’s economy is likely in a soft patch,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. a currency margin company. “The Fed will probably be extremely slow in raising rates. The bias is for the dollar to be sold.” 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 $1.6369 and depreciated 0.1 percent to 89.25 pence per euro, falling for the seventh consecutive day. “Our central scenario is that the U.K. rating remains Aaa and the outlook is stable,” Francesco Meucci, a Moody’s spokesman, said in a phone interview from Paris. “However, 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.” The euro stayed lower against the dollar and the yen after a report showed German industrial production unexpectedly fell for the first time in four months in April. Production slid 0.6 percent from March, when it rose 1.2 percent, the Economy Ministry in Berlin said today. Portuguese Loan 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. “In particular, refinancing risks from the closure or contraction of the Treasury bills market represent a near- term refinancing risk for the government.” 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. The U.S. trade deficit probably widened in April to a 10- month high, reflecting increased crude-oil costs that have since retreated. The gap expanded to $48.8 billion from the $48.2 billion shortfall in March, according to a Bloomberg News survey of economists before tomorrow’s report. The Fed releases its regional Beige Book economic survey today. 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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