By Bo Nielsen Nov. 5 (Bloomberg) -- The yen and the dollar rose as investors scaled back bets on gains in higher-yielding currencies as investors weighed when central banks will withdraw stimulus measures to revive their economies. The Japanese and U.S. currencies climbed most against the New Zealand dollar and Brazilian real. The pound rose after the Bank of England boosted its bond-purchase program by a less-than 25 billion pounds ($41 billion) and left its key interest rate at a record low. The euro was little changed against the dollar before the European Central Bank decides interest rates today. “The market is paring a little bit of risk,” said Lauren Rosborough, a currency strategist at Westpac Banking Corp. in London. “There’s a bit of uncertainty” on central-bank policy. That creates a little bounce in the dollar and the yen.” The yen strengthened to 134.07 per euro at 7:05 a.m. in New York from 134.85 yesterday. It appreciated to 90.37 per dollar from 90.72. The dollar traded at $1.4838 per euro from $1.4861. The MSCI World Index dropped 0.3 percent and the Dow Jones Stoxx 600 Index of European shares fell 0.6 percent, fanning speculation investors reduced so-called carry trades, in which they sell the currency of a nation with low interest rates to buy higher-yielding currencies. Pound Declines The pound advanced versus the dollar and the euro after the Bank of England expanded its asset-purchase program to 200 billion pounds, from 175 billion pounds, less than the amount economists forecast in a Bloomberg News survey. Prime Minister Gordon Brown pledged this week to spend almost 40 billion pounds in a second bailout of Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. “A smaller increase in bond purchases will signal confidence in the U.K. economy and ultimately prove positive for sterling,” said Adam Cole, head of global currency strategy at RBC Capital Markets in London, said before the decision. The pound strengthened to $1.6586, from $1.6554 yesterday, and to 89.43 pence per euro, from 89.77 pence. New Zealand’s dollar fell as unemployment rose to the most since 2000 and Reserve Bank Governor Alan Bollard said the nation’s recovery will be slower than Australia’s. The jobless rate increased to 6.5 percent from 6 percent in the previous three months, Statistics New Zealand said in Wellington today. The median estimate of seven economists surveyed by Bloomberg News was for 6.4 percent. The so-called kiwi fell to 65.01 yen, from 65.70 yesterday in New York. It dropped 0.8 percent to 71.98 U.S. cents. U.S. Unemployment “Uncertainty about the economic recovery is weighing on stocks, fueling risk aversion,” said Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “I expect the U.S. jobless rate to get worse. The bias is for yen and dollar buying.” The U.S. jobless rate rose to 9.9 percent last month from 9.8 percent in September, according to the median estimate of economists in a Bloomberg News survey before tomorrow’s Labor Department report. Employers eliminated 175,000 jobs in October after a reduction of 263,000 in September, a separate Bloomberg survey showed. The euro dropped as some investors bet the European Central Bank will signal today it’s moving closer to withdrawing emergency stimulus measures. Policy makers meeting in Frankfurt will also keep the benchmark interest rate at a record low of 1 percent, according to all economists in a Bloomberg News survey. ‘No Other Choice’ Council member Axel Weber said last week commercial banks need to prepare for a “gradual withdrawal” of the ECB’s liquidity, and signaled next month’s 12-month loan auction may be its last. “The ECB will have no other choice than to leave the monetary floodgates open for a long time,” a BNP Paribas SA team led by Hans-Guenter Redeker in London wrote today in a note to clients. “Investors in risky assets will like the outcome.” The Federal Reserve yesterday repeated its intention to keep interest rates “exceptionally low” for “an extended period” as long as inflation expectations are stable and unemployment fails to decline. Policy makers held the target rate for overnight lending between banks between zero to 0.25 percent.

Source