The euro fell for a second day against the yen on speculation European finance ministers meeting today and tomorrow will struggle to agree on debt- reduction targets amid concern the region’s crisis will persist. The single currency dropped versus 14 of its 16 major counterparts as Portugal’s 10-year bond yields remained near an 11-year high after European Union officials failed this month to agree on expanding aid to the most indebted nations. The yen rose from near a five-week low against the dollar on speculation Japanese exporters took advantage of its recent weakness. New Zealand’s dollar fell after retail sales declined. Europe’s debt crisis is again the market’s focus ahead of finance ministers meeting this week,” said Kumiko Gervaise, an analyst in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest online currency margin-trading company. “The bias is for the euro to be sold.” The euro weakened to 112.67 yen as of 6:52 a.m. in London from 113.06 yen last week in New York. The single currency declined to $1.3548 from $1.3554. The yen strengthened to 83.17 per dollar from 83.43, after falling to 83.68 on Feb. 11, matching the low of Jan. 7. Greece last week joined Italy in opposing annual numerical debt-reduction targets. Greece, which required financial aid last year to help counter its widening deficit, said the proposed rule would force it to make unsustainably large cuts once its support package runs out in 2013, according to a draft of EU legislation. Deficit Target The rule, proposed by the European Commission, would require countries with debt above the EU ceiling of 60 percent of gross domestic product to make annual cuts equal to 1/20th of the excess, or to face sanctions. European finance ministers will meet to review the rules today and tomorrow in Brussels. The yield on Portugal’s 10-year bond rose 26 basis points last week to 7.31 percent. The rate climbed to 7.64 percent on Feb. 10, the highest since the euro’s introduction in 1999. “The recent surge in Portuguese bond yields is a bad sign” for the country’s borrowing costs, said Yuji Saito, director for the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The euro’s weakness is likely to persist.” Yen Gains The yen advanced for the first time in almost two weeks versus the dollar on speculation Japanese companies bought the currency to bring home overseas earnings before Japan’s fiscal year ends in March. “There’s talk of Japanese firms buying the yen, possibly related to fiscal year-end repatriation,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The recent slide in the yen may be attractive to them.” Japan’s large manufacturers expect the yen to average 86.47 per dollar this fiscal year through March 31, the highest since the Bank of Japan’s Tankan business-confidence survey included the yen-forecast question in 1996, compared with the 89.66 predicted in September, the survey showed Dec. 15. Japanese companies may also bring home funds from their overseas bond holdings. The U.S. will make $45 billion in redemption and coupon payments for Treasuries tomorrow, according to estimates by Stone & McCarthy Research Associates in Princeton, New Jersey. N.Z. Dollar New Zealand’s currency fell for a fourth day versus the dollar as the retail sales’ report added to signs of a recession in the second half of 2010. “There was a lot of knee-jerk selling on the headline -- the fact that December was much lower than consensus,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s second-largest lender. Retail sales fell 1.1 percent in December from the previous month, when they rose a revised 1.2 percent, Statistics New Zealand said today in Wellington. Swaps traders are betting the Reserve Bank of New Zealand will raise its benchmark interest rate by 51 basis points over the next 12 months, down from 55 basis points last week, according to a Credit Suisse AG index. The New Zealand dollar declined 0.2 percent to 75.91 U.S. cents, and dropped 0.5 percent to 63.13 yen. Korean Won South Korea’s won gained against 15 of its 16 major counterparts as signs the global recovery is gaining momentum boosted the outlook for the nation’s exports. The Kospi benchmark stock index climbed 1.9 percent, its biggest increase this month. Japan’s economy shrank less than forecast in the fourth quarter, the government said today. U.S. consumer confidence beat estimates in February, a report showed this month. “Asian currencies are stronger because the stock markets are doing better on the back of the economic data,” said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore. “The Korean won should trade amid 1,100 to 1,130 this week.” The won rose 0.5 percent to 1,122.88 per dollar, the largest gain since Feb. 2. -- With assistance from Keiko Ujikane in Tokyo, Candice Zachariahs in Sydney and Patricia Lui in Singapore. Editors: Jonathan Annells, Nicholas Reynolds To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net; Ronnie Harui in Singapore at rharui@bloomberg.net To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net

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