Yen Declines Versus Most Peers as Japan Enters Third Recession; Euro Gains

The yen dropped versus most major counterparts as Japan, its economy hobbled by the record March 11 earthquake, slid into its third recession in a decade and Prime Minister Naoto Kan said he expects the central bank to maintain a flexible monetary policy.

The euro touched the highest level in a week against the dollar and currencies of commodity exporters gained as investors sought higher-yielding assets, sending stocks up. The franc fell against the European currency as Swiss Economy Minister Johann Schneider-Ammann said authorities will consider “appropriate” measures if it continues to strengthen.

“The earthquake is obviously going to have a huge effect on the growth and unemployment and GDP, and we see further yen weakness against the euro specifically,” said Brian Taylor, chief currency trader a Manufacturers & Traders Trust in Buffalo, New York. “The equity markets are pushing the euro up. The risk currencies are back in play.”

The yen dropped 0.4 percent to 116.88 per euro at 2:02 p.m. in New York, from 116.37 yesterday, declining for a fourth consecutive day. It reached 117.24, the weakest level since May 6. Japan’s currency was little changed versus the dollar at 81.69, compared with 81.68 yesterday. It touched 82.23, its weakest level since April 28.

The dollar fell 0.5 percent versus the euro to $1.4316 and touched $1.4325, the weakest since May 13.

The MSCI World Index advanced for a second day, gaining 0.4 percent. The Standard and Poor’s 500 Index rose 0.3 percent.