Yen Advances as Stocks Decline on Speculation Recovery Stalling

By Lukanyo Mnyanda

Dec. 9 (Bloomberg) -- The yen rose as stock markets fell and a report showed Japan’s economy expanded more slowly than initially reported, deepening concern that the pace of the global recovery is flagging.

The yen strengthened for a third day against the euro as the MSCI World Index of stocks slid 0.2 percent, boosting demand for the Japanese currency as a refuge. The British pound weakened to its lowest level in almost two months against the dollar before Chancellor of the Exchequer Alistair Darling presents his pre-budget report today in parliament.

“Risk aversion has been the main driver,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “I wouldn’t exclude the possibility of more bad news, which would be bad for the high- yielding currencies.”

The yen appreciated to 129.24 per euro as of 8:23 a.m. in London, from 130.03 yesterday in New York, after earlier trading at 129.18, the strongest since Nov. 30. Japan’s currency was at 87.71 per dollar, from 88.43. The euro bought $1.4734, from $1.4704, after earlier declining to $1.4668, the weakest level since Nov. 3.

The Japanese currency climbed against all of its 16 major counterparts, rising the most against the South Korean won and the pound.

Sterling dropped 0.3 percent to $1.6236 and weakened 0.5 percent to 90.71 pence per euro.

Japan’s Cabinet Office said today in Tokyo that gross domestic product rose at an annual 1.3 percent pace last quarter, slower than the 4.8 percent rate reported in preliminary figures last month. The median estimate of economists surveyed was for 2.8 percent growth.

Japanese Prime Minister Yukio Hatoyama unveiled a 7.2 trillion yen ($81 billion) stimulus package yesterday and the Bank of Japan last week announced a 10 trillion yen credit program to revive the economy.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net.