By Bo Nielsen and Yasuhiko Seki Oct. 28 (Bloomberg) -- The yen gained on speculation central banks around the world are preparing to withdraw economic-stimulus measures, undermining a six-month rally in stocks and sapping demand for higher-yielding assets. The Japanese currency advanced most against the New Zealand dollar and South Korean won as the MSCI World Index posted its longest streak of losses since February. The euro slid to a one- week low against the yen before reports this week that are forecast to show German consumer prices fell and unemployment rose. The dollar rose most against the South Korean won after U.S. Treasury Secretary Timothy Geithner said yesterday he expects most of the big banks helped by the government’s rescue program to repay loans “relatively quickly”. “We’re getting very close to a peak in the risk rally and we look for the dollar and the yen to outperform,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The combination of loose monetary policy and improving economic fundamentals is getting closer to an end.” The yen appreciated to 135.02 per euro as of 8:22 a.m. in London from 135.89 in New York yesterday, after earlier reaching 134.85, the strongest level since Oct. 20. Japan’s currency strengthened to 91.12 per dollar from 91.80. The dollar was at $1.4810 per euro from $1.4804 yesterday, when it traded at $1.4770, the strongest level since Oct. 13. The dollar will trade at $1.40 per euro and the yen between 125 and 130 per euro in six months, Hardman said. Norges Bank Decision Norway’s central bank may become today the first in Europe to raise borrowing costs since the credit crisis started easing, increasing its overnight deposit rate by 25 basis points to 1.5 percent, according to a Bloomberg survey of 20 economists. Norges Bank Governor Svein Gjedrem will announce the decision at 2 p.m. in Oslo. The jobless rate in Germany, Europe’s biggest economy, probably rose to 8.3 percent in October from 8.2 percent in the previous month, according to a Bloomberg News survey of economists before the report’s release tomorrow. The nation’s consumer price index, calculated using a harmonized European Union method, fell 0.1 percent in October from a year earlier after slipping 0.5 percent in September, a separate survey showed. The Federal Statistics Office in Wiesbaden will release the report later today. “As the market shifts attention to the sustainability or the strength of a recovery from a cyclical upturn, the mood of euphoria may wane,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second- largest lender. Aussie Drops Australia’s dollar dropped as a report showed inflation slowed, easing speculation the central bank will speed up rate increases. Consumer prices advanced 1 percent from the second quarter, when they gained 0.5 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.9 percent increase. The aussie fell to 90.96 U.S. cents, from 91.66 cents. “We saw a modest drop in the pricing of expectations of a 50 basis-point hike next week in Australia, which weighed a bit on the Aussie,” said David Forrester, a currency economist in Singapore at Barclays Capital. “Since then it’s been taken over by what’s going on with the U.S. dollar and equity markets.” Futures markets pared to 10 percent from 14 percent yesterday the chance of a 50 basis-point increase in official interest rates when policy makers meet next week. The Reserve Bank of Australia was the first among the Group of 20 to lift rates since the credit crisis started, increasing its benchmark rate this month by 25 basis points to 3.25 percent. Gross Sees Peak The yen rose against all 16 of the most-active currencies amid concern the rally in stocks and commodities can’t be sustained. The MSCI World Index declined 0.4 percent, its seventh straight drop, the longest streak of losses since the 10 days through Feb. 23. The six-month run-up in shares and raw materials is probably at its peak as U.S. growth lags behind historical averages, according to Bill Gross at Newport Beach, California- based Pacific Investment Management Co. Gross, a founder and co-chief investment officer of the world’s biggest manager of bond funds, has predicted a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy. “What has happened is that our ‘paper asset’ economy has driven not only stock prices, but all asset prices higher than the economic growth required to justify them,” Gross wrote yesterday on Pimco’s Web site.

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