March 6 (Bloomberg) -- The yen may decline for a second day against the dollar after gold and crude oil surged to records, boosting traders' appetite for higher-yielding assets.

The dollar fell to a record low against the euro and declined compared with Brazil's real as investors sold the U.S. currency to buy assets in countries with higher growth rates. The Bank of Japan is forecast to maintain interest rates at 0.5 percent, the lowest among developed nations, at its meeting this week giving traders the confidence to put on carry-trade purchases funded by cheap loans in Japan.

``We are still in a bear market, but the sentiment is so stretched that euro yen, dollar yen may bounce back in the short term,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut.

The yen traded at 158.64 per euro at 7:08 a.m. in Tokyo from 158.76 late yesterday in New York, when it fell by the most in more than a month. It traded at 103.93 per dollar from 104.01, still within about a yen of the three-year high it reached this week. The dollar traded at $1.5268 per euro, touching a record low of $1.5303 per euro yesterday.

The yen yesterday sank compared with all 16 of the most- active currencies after the Institute for Supply Management said its non-manufacturing index, covering almost 90 percent of the economy, improved to 49.3 last month, from a record low of 44.6 in February. The median forecast in a Bloomberg survey was for a reading of 47.3, where below 50 signals contraction.

Crude oil jumped to a record $104.56 a barrel. Gold futures in New York rose as much as 3 percent to $995.20 an ounce, the highest ever.

Ambac Speculation

``People are putting on a little risk again,'' said Mike Moran, senior currency strategist at Standard Chartered Bank in New York.

The yen pared some losses after Ambac Financial Group Inc. said it will sell common stock and equity to bolster its capital. The bond insurer is seeking to stave off a downgrade of its AAA rating, the loss of which would cast doubt on $556 billion of municipal and asset-backed securities insured by the company, forcing some investors to sell the debt.

The Federal Reserve yesterday said in its Beige Book survey that growth has slowed in eight of 12 U.S. regions since the start of the year, hurt by faltering retail sales and manufacturing and a continued decline in housing. A report from ADP Employer Services showed businesses lost 23,000 workers in February, after a gain of 119,000 in January. The median forecast in Bloomberg survey was for an addition of 18,000.

Higher Growth Rates

The dollar yesterday lost 0.9 percent against the real and 0.8 percent against the Australian dollar. The Standard & Poor's 500 index rose TK percent, trimming gains after the Ambac release.

Brazil's economy will grow 4.5 percent this year and Australia 3.4 percent, while the U.S. will expand 1.8 percent, according to the median forecasts in Bloomberg surveys.

Investors borrowing at Japan's cheap rates can buy commodities and securities in Brazil and Australia, where the main rates are 11.25 percent and 7.25 percent, respectively. Swings in exchange rates can erase profits from these rate differences.

The BOJ will keep rates unchanged this week, according to all of the 40 economists surveyed by Bloomberg news.

The euro yesterday fell earlier on speculation European Central Bank President Jean-Claude Trichet will signal after a policy meeting today the region's common currency is too strong.

European finance ministers said this week they are ``increasingly concerned'' about the euro's 16 percent gain against the dollar in the past year.

A gauge traders use to measure the momentum of currency moves suggests the euro is poised to drop.

Momentum Gauge

The euro's 14-day relative strength index, a gauge of the speed of the currency's rally against the dollar, is was 70 for the sixth straight day yesterday, indicating a pull-back in the euro may be imminent. The last time the gauge held above 70, the five days ended Nov. 26, the euro fell about 3 percent against the dollar in the following three weeks.

The ECB will keep its main rate at an almost-six-year high of 4 percent today, according to economists surveyed by Bloomberg News. Futures show traders see about a 50 percent chance the Fed will cut its target rate 0.75 percentage point to 2.25 percent on March 18. The Bank of England is forecast to leave its benchmark at 5.25 percent tomorrow. The balance of bets in the U.S. is on a half-point cut.

New Zealand Dollar

The pound weakened as low as 76.46 pence per euro yesterday and traded at 76.58 pence, from 76.60.

New Zealand's dollar advanced after the central bank said the nation's benchmark interest rate will remain at a record high, boosting the appeal of the South Pacific country's higher- yielding assets.

The local dollar gained 0.8 percent against the yen as Reserve Bank of New Zealand Governor Alan Bollard kept the rate unchanged at 8.25 percent for his sixth successive monetary policy review today.

He said inflationary pressures will ensure borrowing costs stay at the ``current levels for a significant'' time. New Zealand's rate is the highest after Iceland's among Aaa rated economies, making it a favorite for the so-called carry trade.

To contact the reporters on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net

Last Updated: March 5, 2008 17:13 EST