July 13 (Bloomberg) -- The yen and dollar declined against the euro as a rally in Goldman Sachs Group Inc. and other U.S. banks spurred speculation investors will increase holdings of higher-yielding assets.

The pound weakened versus the dollar after the Sunday Times said Lloyds Banking Group Plc may report as much as 13 billion pounds ($21 billion) of new losses. South Korea’s won slid the most on an intraday basis since May following a report saying North Korea’s leader, Kim Jong Il, is terminally ill.

“It’s clear risk appetite is in its ascendancy today,’ said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York.

The yen depreciated 0.3 percent to 129.30 against the euro at 12:26 p.m. in New York, from 129 on July 10. The dollar declined 0.3 percent to $1.3976 versus the euro, compared with $1.3936. Japan’s currency traded at 92.57 per dollar, compared with 92.54 at the end of last week.

The Japanese and U.S. currency dropped against most of the major counterparts tracked by Bloomberg as a gain in stocks encouraged investors to get funds in a country with low borrowing costs and buy assets where returns are higher.

The yen fell 0.9 percent to 80.25 versus the Canadian dollar and decreased 0.6 percent to 58.30 against New Zealand’s currency. The dollar fell 0.3 percent to 1.9896 Brazilian reais and slid by the same amount to 7.8995 Swedish kronor. The target lending rate of 0.1 percent in Japan and as low as zero in the U.S. compare with 9.25 percent in Brazil, 2.5 percent in New Zealand and 0.25 percent in Sweden.

Stocks Gain

U.S. stocks advanced after the analyst Meredith Whitney gave Goldman Sachs the only “buy” recommendation among the eight companies she covers and told CNBC the shares of Bank of America Corp. are the “cheapest” among U.S. banks. The Standard & Poor’s 500 Index advanced 1.5 percent after four weeks of losses.

The yen and dollar weakened today against the euro after Japan’s currency posted its biggest weekly rally since May and the greenback advanced as speculation the global recovery will be slow encouraged demand for a refuge.

Japan’s currency typically rises during times of financial turmoil because its trade surplus means the nation doesn’t have to rely on overseas lenders. The dollar benefits as the world’s main reserve currency.

To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

Last Updated: July 13, 2009 12:30 EDT