By Bo Nielsen and Yasuhiko Seki Nov. 24 (Bloomberg) -- The yen and dollar rose as a decline in stocks and dimming expectations about the U.S. economic recovery increased demand for currencies perceived as safer. The Japanese currency advanced against all 16 of its most- active counterparts before the release of data forecast to show the U.S. economy expanded at a slower than initially estimated pace in the third quarter. The greenback also climbed on speculation traders exited bets against the dollar before the U.S. Thanksgiving holiday. “Risk aversion is back in the markets supporting the yen and the dollar and putting pressure on high-yielding currencies,” said Antje Praefcke, a currency analyst at Commerzbank AG in Frankfurt. “In the current environment a weak U.S. gross domestic product number weighs on sentiment. Traders are a little more sensitive to sentiment changes because they want to get out of positions ahead of the long U.S. weekend.” The yen was at 132.52 versus the euro at 11:20 a.m. in London, from 133.11 yen in New York yesterday. The dollar traded at $1.4948 per euro, from $1.4961 yesterday and after trading as strong as $1.4889 earlier. The Japanese currency was at 88.67 against the dollar, from 88.97. Australia’s dollar fell to 91.87 U.S. cents, from 92.39 cents. New Zealand’s dollar weakened to 72.61 U.S. cents, from 73.26 cents. The greenback fell against all of the 16 major currencies so far this month, dropping 1.6 percent versus the euro and the yen. The U.S. government’s revised figures for third-quarter gross domestic product, due today, may show the world’s largest economy expanded at a 2.8 percent annual rate, compared with the 3.5 percent estimated last month, according to the survey. The revision will reflect a bigger trade gap and weaker retail sales in September, economists said. Short Unwinding The MSCI World Index of shares slid 0.3 percent after earlier dropping as much as 0.6 percent. “Recent flurries of dollar strength appear largely motivated by risk reduction,” Steven Pearson, the London-based head of G-10 currency strategy at Bank of America Corp., wrote today. “Notably U.S. economic data have become more mixed. Further poor U.S. economic data and a general desire to reduce risk ahead of year-end are, in our view, likely to interact to support the dollar.” The Australian dollar and other higher-yielding currencies weakened after the Frankfurter Allgemeine Zeitung newspaper reported, citing an unidentified banking industry person, that two German regional savings bank groups that hold a majority stake in state-owned WestLB AG are prepared to let the Dusseldorf-based lender become insolvent. Euro Pares Loss “The WestLB story may weigh on euro and that will weigh on the Aussie and kiwi,” said Phil Burke, chief currency dealer at JPMorgan Chase & Co. in Sydney. “We won’t dip too far from here, maybe toward 91.80 on the Aussie and 72.60 cents on the kiwi.” The euro pared losses against the dollar after German business confidence rose more than forecast in November. The Ifo institute’s business climate index rose to 93.9 in November from a revised 92 in October, beating a median forecast of 92.5 in a Bloomberg survey of economists. The index is based on a survey of 7,000 executives. Risk Aversion “A good European number may support the euro-dollar for a little while but the general sentiment of risk aversion will prevail,” Praefcke said. Charles Evans, president of the Federal Reserve Bank of Chicago, told the Financial Times yesterday that U.S. interest rates may stay near zero until “late 2010, perhaps later.” “Unless people start thinking that there will be rate increases in the U.S., the euro will continue to outperform the dollar,” said Hiroshi Maeba, deputy general manager of foreign exchange trading at Nomura Securities Co. in Tokyo. Futures contracts on the Chicago Board of Trade showed yesterday a 33 percent chance that the Fed will raise interest rates by June, down from 67 percent odds a month ago. The pound fell 0.5 percent to $1.6528 after Bank of England Governor Mervyn King said the U.K. economy still faces “profound challenges.”

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