Yen Falls as Recovering Global Economy Boosts Demand for Yield

The yen weakened for a third day against the euro as improving economic data and central bank comments that the global recession is abating spurred investors to buy higher-yielding assets.

The Japanese currency declined the most versus the South Korean won and Australian dollar as stocks extended a rally after Federal Reserve Chairman Ben S. Bernanke said last week chances for near-term growth “appear good.” The euro rose against 12 of the 16 most-traded currencies before a report that economists said will show European industrial orders fell at a slower pace.

“We’ll see a continuation of the risk rally and that’s consistent with yen weakness,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London, the biggest foreign exchange trader. “The economic data has been sufficiently strong to persuade even the more bearish in the market.”

The yen weakened to 135.72 per euro as of 8:43 a.m. in London from 135.21 in New York on Aug. 21. It earlier declined to 136.09 per euro, the weakest level since Aug. 14. The Japanese currency also dropped to 94.89 per dollar from 94.38. The dollar appreciated to $1.4301 per euro from $1.4326.

The MSCI World Index of shares rose 0.7 percent, its fifth straight gain, as every stock market in Europe opened higher, sending the region’s Dow Jones STOXX Index up 0.6 percent. The Standard & Poor’s 500 Index gained 2.2 percent last week, touching a 10-month high, as a report showed sales of existing U.S. homes climbed.

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