By Yoshiaki Nohara and Ron Harui March 11 (Bloomberg) -- The yen and dollar rose versus their major counterparts after Chinese reports on inflation, factories and loans fueled concern the government will act to damp growth, boosting demand for the lowest-yielding currencies. Japan’s currency strengthened from a two-week low against the euro after Chinese inflation reached a 16-month high and on speculation exporters brought funds home before the fiscal year ends this month. New Zealand’s dollar fell for a second day versus the greenback as the central bank signaled a slower exit from stimulus measures. South Korea’s won slid on a media report the nation’s largest power company purchased dollars. “Strong inflation data should enhance pressure for tightening in China,” said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Securities Co., unit of Japan’s largest publicly traded bank by market value. “The bias is for the yen to rise.” The yen rose to 123.26 per euro as of 6:58 a.m. in London from 123.62 in New York yesterday, when it fell to 124.00, the weakest since Feb. 23. Japan’s currency advanced to 90.38 per dollar from 90.52. The dollar climbed to $1.3636 per euro from $1.3657, and advanced to $1.4961 per pound from $1.4978. New Zealand’s dollar dropped 0.5 percent to 69.84 U.S. cents, and declined 0.7 percent to 63.12 yen. Chinese Inflation The yen and dollar rallied after China’s statistics bureau said consumer prices rose 2.7 percent in February from a year earlier, after gaining 1.5 percent the prior month. Industrial output climbed 20.7 percent in the first two months of the year. Banks extended 700 billion yuan ($102.5 billion) of new loans in February, central bank data showed today. Premier Wen Jiabao aims to hold full-year inflation at about 3 percent after banks flooded the financial system with money to combat the global recession. The economy grew 10.7 percent last quarter and central bank Governor Zhou Xiaochuan said March 6 that anti-crisis policies, including the yuan’s peg to the dollar, must end “sooner or later.” The yen strengthened versus all the 16 most-traded currencies on speculation Japanese companies brought home their overseas earnings. “Japanese exporters may be repatriating yen, given the March fiscal year-end is approaching,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “There’s talk they may be behind their sales of euro-yen.” Exporters may also have been prompted to bring home funds after Japan’s currency fell to a two-week low against the dollar and euro yesterday, Ishikawa said. New Zealand Dollar New Zealand’s dollar fell against all its major counterparts after Reserve Bank Governor Alan Bollard kept the benchmark interest rate at a record low and said weak consumer spending and higher bank funding costs are slowing the recovery. “Households are still cautious with house sales and credit growth remaining subdued,” Bollard said after leaving the official cash rate at 2.5 percent. Expectations of a rate boost as early as March or April have dimmed after house prices fell in January and credit-card spending declined for a second month in February. “Market expectations prior to the decision had been for a 25 basis point hike in June and every meeting thereafter until the end of the year,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “One of those tightenings may now be priced out of the curve, weighing on the New Zealand dollar.” South Korea’s currency fell the most in two weeks versus the dollar after Dow Jones Newswires said Korea Electric Power Corp. had begun implementing a plan to purchase $500 million after the won rose against the greenback, citing a source it did not identify. “There was some news that Kepco will need to buy $500 million, that pushed up the dollar-won,” said Tae-Shin Park, a bond and currency trader at Societe Generale SA in Seoul. The won weakened 0.2 percent, the most since Feb. 25, to close at 1,133.43 versus the dollar, according to data compiled by Bloomberg. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at Ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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