By Yoshiaki Nohara and Yasuhiko Seki Dec. 2 (Bloomberg) -- The yen weakened for a second day against the euro as signs of a recovering global economy increased demand for higher-yielding assets. The yen fell against all of the 16 most-active currencies before a report today that economists said will show U.S. companies cut fewer jobs last month as the world’s biggest economy improved. The dollar traded near a 16-month low against the euro as European finance leaders played down potential risks to their banks from Dubai’s debt problems. Australia’s currency rose against the yen and the dollar as gold reached a record. “The market has been moving toward risk taking, boosting demand for cross currencies against the yen,” said Yuji Saito, head of the foreign-exchange group at Societe Generale SA in Tokyo. “Concerns about Dubai seem to have abated finally.” The yen dropped to 131.32 per euro as of 6:25 a.m. in London from 130.74 in New York yesterday. Japan’s currency weakened to 87.01 per dollar from 86.68, after rising as high as 84.83 on Nov. 27. The dollar was at $1.5092 per euro from $1.5081. The greenback fell to $1.5144 on Nov. 25, the lowest level since Aug. 8, 2008. U.S. companies cut 150,000 jobs in November, down from 203,000 in October, according to the median estimate of economists in a Bloomberg News survey before today’s report from ADP Employer Services. That would be the smallest reduction since July 2008. ‘In Motion’ “The global recovery is in motion,” said Adam Carr, senior economist at ICAP Australia Ltd. in Sydney. “A stronger employment report, of course, will lead to an increase in risk appetite, and we will probably see that weigh heavily on the U.S. dollar.” Benchmark interest rates of 3.75 percent in Australia and 2.5 percent in New Zealand compare 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 risk in such trades is that currency market moves will erase profits. Government-related Dubai World has begun talks with banks to restructure $26 billion of debt. The holding company is seeking to delay payments on less than half its $59 billion of obligations, easing concern a default will hamper the global banking system’s recovery from the credit crisis. ‘Reasonable Level’ The exposure of “European banks seems to be so far, from what we can assess, at a reasonable level,” Finance Minister Anders Borg of Sweden, which holds the rotating European Union presidency, said yesterday as he arrived for a meeting of finance chiefs in Brussels. World stock markets have rallied since Dubai World announced its debt reorganization plan. The MSCI Asia Pacific Index of regional shares advanced 0.6 percent today, a third day of gains. “Buying of riskier assets and selling of the dollar will continue amid waning concerns over debt problems in Dubai,” said Akane Vallery Uchida, foreign-currency strategist in Tokyo at Royal Bank of Scotland Group Plc. “Rising stocks will also spur buying of cross currencies against the yen.” Australia’s currency advanced for a third day against the yen as gold, the nation’s third most-valuable raw material export, climbed to the highest ever and a gauge of metals prices yesterday rose to the strongest since September 2008. Copper, Gold The London Metals Index, tracking the prices of copper, aluminum, lead, tin, zinc and nickel, rose 1.9 percent. Gold futures for February delivery rose to a record for a second day. Commodity shipments account for more than half the South Pacific nations’ exports. “Record gold prices are driving the Australian dollar higher,” said Takashi Kudo, director of foreign-exchange sales in Tokyo at NTT SmartTradeInc., a unit of Nippon Telegraph & Telephone Corp. Australia’s currency climbed to 92.84 U.S. cents from 92.50 cents, and gained 0.7 percent to 80.72 yen. New Zealand’s dollar appreciated to 72.82 U.S. cents from 72.59 cents, and rose 0.6 percent to 63.32 yen. Gains in the euro were tempered after Luxembourg Prime Minister Jean-Claude Juncker, who chairs a group of euro-area finance ministers, said after a euro-zone meeting in Brussels that the currency is “overvalued.” “The euro’s advance beyond $1.50 is slowing partly because people are becoming cautious about its strength,” said Daisaku Ueno, an analyst in Tokyo at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest currency margin company. “Warnings from European officials are also slowing the pace.” The euro reached $1.6038, a record high, on July 15, 2008. Bank of Japan The yen fell for a second day against the dollar after the Bank of Japan said yesterday it would provide three-month loans to commercial banks at an interest rate of 0.1 percent in an enhanced credit easing attempt. “As the new facility can guide yen-based borrowing costs lower, it may gradually take some upward pressure off from the yen,” said Yuki Sakasai, a foreign-currency strategist in Tokyo at Barclays Bank Plc. Three-month yen London interbank offered rates, or Libor, stood at 0.294 percent yesterday, 3.8 basis points higher than rate for dollar loans, the narrowest spread since Nov. 18, according to British Bankers’ Association. Dollar loans became cheaper than those in yen in August. BOJ Governor Masaaki Shirakawa and his board kept the key overnight lending rate at 0.1 percent at an emergency meeting yesterday and held monthly purchases of government bonds at 1.8 trillion yen ($20.7 billion) by a unanimous vote. Prime Minister Yukio Hatoyama’s government has stepped up calls on the central bank to prop up growth after declaring on Nov. 20 the economy was in deflation. -- With assistance from Bernard Lo in Hong Kong. Editors: Nicholas Reynolds, Rocky Swift To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.

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