By Paul Dobson and Yasuhiko Seki March 5 (Bloomberg) -- The yen weakened for a second day against the dollar as stocks rose and investors speculated the Bank of Japan will boost credit easing, while the U.S. may move closer to interest-rate increases as the economy strengthens. Japan’s currency declined against the euro after Nikkei English News said the central bank is likely to discuss more monetary-easing measures at its next meeting. Europe’s currency headed for a weekly loss against the dollar as Greece’s prime minister began five days of financial diplomacy over potential aid with a meeting in Luxembourg. The South Korean won led Asian currencies higher amid speculation a U.S. employment report today will show less job losses than economists forecast. “The big battle has been this standoff between the government and the Bank of Japan, and it looks as if the BOJ has winked,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “People will undoubtedly think it will make the yen attractive as a funding currency.” The yen weakened to 89.41 per dollar as of 7:36 a.m. in New York from 89.02 yesterday, and is down 0.4 percent this week. Japan’s currency depreciated to 121.43 versus the euro, from 120.91. The dollar traded at $1.3589 per euro, from $1.3581. The MSCI Asia Pacific Index of shares advanced 1 percent, headed for a second weekly gain, and the Dow Jones Stoxx 600 Index gained 0.6 percent. Japan’s currency headed for its third weekly decline in four weeks against the dollar as lawmakers ratcheted up pressure on the nation’s central bank to tackle the prospect of deflation. It’s still stronger against all 16 of its most-traded peers this year after a weakening of the global economic recovery drove investors to seek the safest assets. BOJ Measures The Bank of Japan may discuss ways to lower short-term rates at its two-day meeting starting March 16, Nikkei said, without citing any sources. A decision on specific measures is likely to take place in April, when two board meetings are scheduled, the newspaper said. Japan’s central bank unveiled a 10 trillion yen ($112.1 billion) lending facility for commercial lenders in December after the yen surged to a 14-year high of 84.83 per dollar the previous month and government ministers urged the central bank to do more to combat deflation. The rate banks charge each other to borrow yen for three months fell below the dollar rate for the first time since August yesterday, boosting its appeal as a funding currency. Asian Currencies The South Korean currency rose for a sixth day versus the dollar and the Taiwanese dollar strengthened before the U.S. Labor Department reports its non-farm payrolls report today. U.S. companies cut 68,000 jobs in February, after trimming 20,000 positions the month before, according to a Bloomberg News survey. Claims for U.S. jobless benefits fell to 469,000 last week, the Labor Department said yesterday. That compared with economist estimates for 470,000. “Pessimism about the U.S. employment report has receded following better-than-expected initial jobless claims,” said Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. in Tokyo. “Equities in Asia are also gaining. All of this is positive for risk appetite.” The Taiwan dollar gained 0.1 percent to NT$31.918 and the Korean won climbed 0.4 percent to 1,140.3 per dollar. James Bullard, president of the Federal Reserve Bank of St. Louis, said yesterday that some “softer” data on the U.S. economy hasn’t prompted him to lower his forecast for growth this year. The central bank’s current unprecedented monetary stimulus is appropriate with the U.S. economy in the early period of a recovery, he said. ‘Poker Game’ The euro was little changed against the dollar, heading for a weekly decline. It may fall “massively” should investors test the European Union’s strategy to support Greece, BNP Paribas SA said in an investor note today. EU nations are working on a contingency rescue plan for Greece, according to two people briefed yesterday in Berlin by an EU official. “Europe is playing a type of poker game with a potentially big bluff,” analysts led by Hans-Guenter Redeker, the London- based global head of foreign-exchange strategy at BNP, said today in a research note. “The real problem would arise in the case of spreads rewidening, activating Europe’s ‘Plan B’ to provide financial aid to Greece. In this case the plan to ring fence Greece would collapse, sending the euro massively lower.” New Zealand Dollar New Zealand’s dollar has been the second-worst performer among major currencies this week on speculation the central bank will keep borrowing costs at a record low at its next policy review on March 11. The South Pacific economy lost some momentum as retail spending and the property market slowed in the first months of 2010, the Treasury Department said March 1. Reserve Bank of New Zealand Governor Alan Bollard last month said he is looking for evidence the economic recovery has become self sustaining before he starts raising interest rates from record lows. Morgan Stanley recommended investors sell the New Zealand dollar against the U.S. dollar, saying the nation’s economic growth isn’t strong enough to persuade policy makers to increase borrowing costs. “Recent economic activity data is not consistent with the tightening that is priced into interest-rate markets,” currency strategists including Stephen Hull in London wrote in a note dated yesterday. “We expect the Reserve Bank of New Zealand’s signal to be consistent with this at next week’s meeting.” New Zealand’s dollar has slid 1.2 percent this week to 68.95 U.S. cents. It declined to 68.52 cents yesterday, the lowest level since Feb. 25. Ichimoku Cloud The U.S. dollar may weaken to 84.83 yen, a 15-year low reached in November, according to Mizuho Corporate Bank Ltd., citing trading patterns. The greenback’s drop below the so-called cloud on an ichimoku chart signals the currency is in a downtrend, said Hiroyuki Tanaka, chief technical analyst at Mizuho Corporate Bank in Tokyo. Should the dollar fall “clearly” below 87.50, it may slide to 84.83, a low reached on Nov. 27 that was weakest since July 1995, he said. “The U.S. currency is poised to test the S-point between 87.30 yen and about 87.50 yen,” Tanaka said yesterday, referring to an area where the greenback’s decline may stop. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net

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