By Ron Harui and Paul Dobson March 1 (Bloomberg) -- The yen fell against higher-yielding currencies including Australia’s dollar as Asian stocks advanced for a second day, signaling renewed interest in assets perceived to have more risks and potential returns. The euro advanced against the Japanese currency amid speculation the European Union is nearing an agreement to help Greece manage its budget deficit. The U.K. pound dropped to the lowest in almost ten months against the dollar as polls showed that the U.K. may have its first minority government since 1974, hampering efforts to cut the nation’s debt. “We ended last month on a rather positive note as far as risk is concerned and the yen is piggybacking on that today,” said Geoffrey Yu, a currency strategist at UBS AG in London. “It looks as if there’s going to be a settlement over Greece.” The yen depreciated to 80.22 per Australian dollar as of 7:55 a.m. in London from 79.65 in New York on Feb. 26. It weakened to 89.24 per dollar from 88.97 yesterday. Australia’s dollar was at 89.94 U.S. cents from 89.54 cents, after earlier reaching 90.08 cents, the highest since Feb. 23. The MSCI Asia Pacific Index of shares gained 0.8 percent. The pound fell 0.7 percent to $1.5132, after dropping to $1.5097, the lowest since May 14. Japan’s currency also slipped after Financial Services Minister Shizuka Kamei said in parliament he wants the central bank to underwrite government debt. Finance Minister Naoto Kan told lawmakers in Tokyo today that he wants the nation’s central bank to boost its efforts to fight deflation. Japan’s Kan, Kamei The Japanese government has increased calls on the Bank of Japan to prop up growth since the administration declared the economy was in deflation on Nov. 20. Consumer prices excluding fresh food fell 1.3 percent in January from a year earlier, an 11th month of declines, the statistics bureau said last week. “Government officials appear to be calling on the Bank of Japan to do more on the monetary-policy easing front,” said Takashi Kudo, general manager of market information service in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “This may weigh on the yen.” Sterling extended its decline against the dollar this year to 6.2 percent, and depreciated against all 16 of the most widely traded currencies as a poll showed the opposition Conservative Party has the smallest poll lead over the Labour Party in more than two years. Elections must be held by June. Net Shorts “The political development added to the negative sentiment about the pound,” said Audrey Childe-Freeman, a senior currency strategist at Brown Brothers Harriman Ltd. in London. “You will need a government with a strong majority to push ahead with reforms that the U.K. needs.” The difference in the number of wagers by hedge funds and other large speculators on a decline in the pound compared with those on a gain -- so-called net shorts -- was 62,884 on Feb. 23, compared with net shorts of 56,079 a week earlier, the figures from the Futures Washington-based Commodity Futures Trading Commission showed. German Chancellor Angela Merkel and Luxembourg Prime Minister Jean-Claude Juncker signaled yesterday that European Union Monetary Affairs Commissioner Olli Rehn may today push Greece to deepen planned spending cuts to reduce its budget deficit when he meets Greek Prime Minister George Papandreou. Euro Sentiment Four German lawmakers said the nation is considering buying Greek bonds through state-owned lender KfW Group, part of a European plan to grant Greece as much as 25 billion euros ($34 billion) in aid should the need arise. They spoke on the condition of anonymity because the information is confidential. The U.S. dollar fell for a second day against Australia’s before reports this week that may add to evidence the economic recovery isn’t strong enough for the Federal Reserve to raise borrowing costs. The Institute for Supply Management’s factory index fell to 58.0 last month from 58.4 in January, according to a Bloomberg News survey of economists before the data’s release today. Payrolls dropped by 50,000 in February after declining by 20,000 in January, according a separate survey before the Labor Department’s March 5 report. “A pessimistic view about the U.S. economy is likely to dominate the market due to the influx of data this week, including ISM and non-farm payroll data,” said Makoto Noji, a senior market analyst in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest banking group. “This will keep a lid on the dollar.” To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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