By Yasuhiko Seki and Ron Harui Dec. 11 (Bloomberg) -- The yen weakened for a second day against the euro as signs the global economy is improving spurred demand for higher-yielding assets. Japan’s currency dropped against all of its 16 major counterparts before U.S. reports today that may show retail sales rose for a second month and consumer confidence rebounded. Australia’s dollar headed for a second weekly gain after a report showed exports from China, the South Pacific nation’s largest trading partner, fell the least in 14 months. The pound rose after Moody’s Investors Service said it had no plans to revise its Aaa ratings for the U.K. “Risk sentiment is spreading as the global economy recovers, led by China,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest lender. “Investors will continue to favor higher-yielding currencies over the yen and dollar.” The yen declined to 130.88 per euro as of 2:27 p.m. in Tokyo from 129.94 yesterday in New York, paring its weekly gain to 2.7 percent. The currency fell to 88.84 per dollar from 88.20. The dollar was at $1.4733 per euro from $1.4732. Australia’s dollar traded at 91.64 U.S. cents from 91.66 cents yesterday, having gained 0.2 percent this week. The currency rose 0.7 percent to 81.24 yen. U.S. retail sales increased 0.6 percent in November after rising 1.4 percent in the previous month, according to the median forecast of economists in a Bloomberg survey. The Commerce Department will release the figures today. Risk Sentiment “A good U.S. retail sales figure would probably lead to positive risk sentiment,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “Such a result is likely to support the crosses against the yen.” The Reuters/University of Michigan preliminary index of consumer sentiment for December rose to 68.8 from 67.4 a month earlier, according to the Bloomberg survey of economists before the release today. The Nikkei 225 Stock Average gained 1.3 percent and the MSCI Asia Pacific Index of shares advanced 0.9 percent after the Standard & Poor’s 500 Index climbed 0.6 percent yesterday.. Australia’s currency strengthened for a second day against the yen as reports showed declines in China’s exports slowed, industrial output rose more than expected and imports surged. Chinese Exports China’s exports fell 1.2 percent in November from a year earlier and imports surged 26.7 percent, the government said today. The rate of decline in overseas shipments was the least since October 2008. “Strong headline figures from China, which now holds the key to assessing the health of the global economy, enhance risk trades,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd. “This may then support capital inflow into countries like Australia that benefit from a recovery in the Chinese economy.” China’s statistics bureau also said today that industrial production grew 19.2 percent in November from a year earlier. That compared with a 16.1 percent increase in October. Benchmark interest rates are 3.75 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. Moody’s Ratings The pound rose the most in a week against the yen and the dollar after Dow Jones reported Moody’s has no intention of revising its ratings for the U.K. and U.S. “At this point, we have no plan to change the rating, and we will wait to see what happens after the effects of the global recession and financial crisis have fully played out,” Steven Hess, vice president and senior credit officer of the sovereign ratings group for Moody’s, said on a teleconference, according to Dow Jones. The pound gained 1 percent to 144.95 yen, and rose 0.2 percent to $1.6313. The currency dropped 2.2 percent against the yen on Dec. 8 after Moody’s said its ratings on the U.S. and the U.K. may “test the Aaa boundaries.” “A rating warning from Moody’s drove the pound lower earlier this week and soothing comments from the same company triggered a knee-jerk buy-back of the currency today,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co., a foreign-exchange margin-service company. The euro headed for a second weekly decline against the dollar, the longest stretch in five months, on speculation the credit ratings of more European nations will be lowered. Spain had the outlook on its debt grade cut to “negative” from “stable” by Standard & Poor’s this week on its public finances. Greece’s credit ranking was reduced one step to BBB+ by Fitch Ratings and Portugal’s outlook was revised to “negative” from “stable” by Standard & Poor’s. “There are lingering concerns about the health of the eurozone,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “These worries are taking the shine off the euro.” To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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