By Ron Harui and Yoshiaki Nohara Aug. 14 (Bloomberg) -- The yen rose for a second day against the dollar and climbed versus the euro amid speculation Japanese companies are bringing back earnings on overseas assets. The yen headed for its biggest weekly gain in a month against the dollar before the U.S. makes $79.2 billion in redemption and coupon payments for Treasuries, according to estimates from Bank of Tokyo-Mitsubishi UFJ Ltd. The euro was poised for a weekly loss versus the yen before a European report forecast to show consumer prices fell. “The yen is being bought as Japanese investors may bring home redemptions and coupons from Treasuries,” said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “That’s been happening throughout this week.” The yen climbed to 135.80 per euro as of 1:26 p.m. in Tokyo from 136.46 in New York yesterday. It rose to 134.09 on Aug. 12, the strongest since July 30. Japan’s currency gained to 95.20 per dollar from 95.48. The euro declined to $1.4265 from $1.4292. The yen may rise to as high as 94 versus the dollar next week, Kudo said. The Australian dollar traded at 84.22 U.S. cents, after reaching 84.78 cents, the highest since Sept. 22. New Zealand’s currency dropped 0.05 percent to 67.87 U.S. cents. It earlier reached 68.31 cents, the highest since Sept. 29. The Dollar Index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners, was at 78.454 from 78.489 yesterday. Japanese investors are the biggest foreign holders of Treasuries after China with $677.2 billion of the securities in May. Japan’s foreign reserves total $1.02 trillion. European Prices Consumer prices in the euro area dropped 0.6 percent in July, unchanged from the preliminary estimate, according to a Bloomberg News survey of economists. The European Union’s statistics office will release the data today in Luxembourg. “The European report may suggest deflation is becoming entrenched in the euro area, which would be very bad for the economy,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “A weaker euro would be better in a deflationary situation and any interest-rate hikes would be off the table.” The European Union’s statistics office said yesterday gross domestic product in the region fell 0.1 percent last quarter following a 2.5 percent decline in the previous three months. Australia Rates The Australian and New Zealand dollars touched the highest level since September as Asian stocks gained. Japan’s Nikkei 225 Stock Average increased 0.7 percent, while the MSCI Asia Pacific Index of regional shares added 0.4 percent. Reserve Bank of Australia Governor Glenn Stevens said today it will be appropriate to increase interest rates in the future, lending further strength to the nation’s currency. “Stevens’ upbeat testimony has helped lift Aussie dollar,” said Sue Trinh, a senior currency strategist at RBC Capital Markets, a unit of Canada’s biggest lender. “That barrier at 85 cents is still ripe for the picking but the real question is whether the Aussie can sustain those levels over the shorter term.” Benchmark interest rates of 3 percent in Australia and 2.5 percent in New Zealand compares with as low as zero in the U.S. and 0.1 percent in Japan, making the South Pacific nations’ assets attractive to investors seeking higher returns. The Federal Reserve said this week it will keep interest rates low for an “extended period.” Easing Expectations “There was also further easing of market expectations over Fed rate hikes, which weighed down on the buck,” analysts led by Marc Chandler, New York -based global head of currency strategy at Brown Brothers Harriman & Co., wrote in a research note today. Losses in the dollar were tempered before a report that economists say will show confidence among U.S. consumers gained this month, adding to signs the recession is easing in the world’s largest economy. The Reuters/University of Michigan final index of consumer sentiment probably rose to 69 in August from 66 in July, a Bloomberg News survey of economists showed before the data due today. “Michigan confidence data are showing signs of stabilization in the economy, providing a floor for the dollar against the euro,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. The dollar may trade between $1.4 and $1.435 per euro next week, Nihei said. To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net.

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