The yen and the dollar strengthened against most of their major counterparts as concern that unrest in the Middle East will spread boosted demand for safer assets. Japan’s currency rose from a three-month low against the euro as stocks fell in Europe and Asia. Libyan leader Muammar Qaddafi’s son Saif said the country may have a civil war. The euro dropped after German Chancellor Angela Merkel’s Christian Democratic Union suffered an election defeat in the country’s richest state, fuelling concern that European Union attempts to deal with the sovereign debt crisis will be derailed. New Zealand’s dollar climbed on speculation higher payouts to farmers will boost the economic recovery. “We’re concerned about the situation in the Middle East, and that’s going to keep risk aversion on the agenda, which supports the dollar and the yen,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. The yen climbed the most against the South Korean won, appreciating by 0.6 percent to 13.44515 as of 11:32 a.m. in London. It was 0.4 percent stronger against the Australian dollar, at 84.07 yen. Japan’s currency traded at 113.79 per euro from 113.90 in New York on Feb. 18. It was little changed at 83.15 per dollar. The euro slipped to $1.3685 from $1.3693, after earlier weakening to $1.3663. The New Zealand dollar climbed for a fourth day against its American counterpart and was 0.4 percent stronger at 76.44 U.S. cents. Currency moves maybe exaggerated today because of lower than usual trading volumes amid a U.S. public holiday, Christensen said. Civil War Saif al-Islam Qaddafi called on protesters to engage in dialogue or face a civil war that risks “hundreds of thousands of dead,” as a widening revolt posed the most serious challenge to his father’s 41 years of rule. Libyan security forces yesterday attacked anti-government protesters, in Benghazi, the nation’s second-largest city. The North African country, holder of the continent’s largest reserves of crude oil, has become the focal point of region-wide protests ignited by the ouster of Tunisia’s president last month and energized by the fall of Egyptian President Hosni Mubarak on Feb. 11. Violence has also flared in Yemen, Djibouti and Bahrain. The yen typically strengthens in times of political, financial and economic turmoil as Japan’s trade surplus makes the currency attractive because it means the nation doesn’t have to rely on overseas lenders. German Confidence Europe’s common currency pared losses after a report showed German business confidence unexpectedly rose to a record in February. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 111.2 from 110.3 in January. That’s the highest since records for a reunified Germany began in 1991. Economists predicted the index would hold steady, according to the median of 38 forecasts in a Bloomberg News survey. The euro climbed for a second day against its Swiss counterpart, strengthening by 0.3 percent to 1.2973. It advanced by 0.2 percent against the Swedish krona to 8.7627. “It’s the better-expected Ifo data today which is pushing the euro versus the franc,” said Ursina Kubli, a currency analyst at Bank Sarasin & Cie in Zurich. “All in all, the franc is overvalued at the moment.” Dairy Payments New Zealand’s dollar climbed against all of its 16 most- actively traded peers on speculation Fonterra Cooperative Group Ltd. will raise its forecast for payouts to farmers. The board of Auckland-based Fonterra, the world’s largest dairy exporter, meets tomorrow after whole milk powder prices climbed to a 31-month high. The dairy exporter raised its forecast payment to farmers by 4.5 percent on Dec. 10, citing higher international prices. “Fonterra could be announcing an upward revision to their forecast dairy payout for this season sometime this week,” said Khoon Goh, head of market economics at ANZ National Bank Ltd. in Wellington. That should be taken positively by the currency markets.” To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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