Oct. 28 (Bloomberg) -- The yen gained versus all of its major counterparts on speculation preparations by central banks to withdraw economic-stimulus measures will sap demand for higher-yielding assets.

Japan’s currency posted its biggest advance versus the Australian and New Zealand dollars as the MSCI World Index recorded its longest streak of losses since February. The euro fell against the yen before reports this week that are forecast to show German unemployment rose.

“We’re getting very close to a peak in the risk rally,” 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 134.71 per euro at 6:59 a.m. in New York, from 135.89 yesterday, after reaching 134.48, the strongest level since Oct. 15. Japan’s currency climbed to 91.07 per dollar, from 91.80. The dollar was at $1.4791 per euro, compared with $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 will be in a range of 125 to 130 per euro in six months, according to Hardman.

The yen appreciated 2.3 percent to 82.25 versus the Australian currency and the dollar gained 1.3 percent to 73.48 U.S. cents versus New Zealand’s on bets investors will reduce carry trades, in which they borrow in a currency of a nation to purchase assets in another country where returns are higher.

Borrowing Costs

Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. make the yen and dollar favored targets for investors seeking to fund carry trades.

“We continue to target the dollar at $1.45 per euro in one month as risk sentiment is clearly showing signs of strain,” Singapore-based Gareth Berry, a currency analyst at UBS AG, wrote in a note today.

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 a quarter-percentage point to 1.5 percent, according to the median forecast of 20 economists in a Bloomberg survey. Norges Bank Governor Svein Gjedrem will announce the decision at 9 a.m. New York time.

India’s central bank yesterday increased the statutory liquidity ratio for banks to 25 percent from 24 percent and lifted the inflation forecast.

U.S. Treasury Secretary Timothy Geithner said yesterday at a New York conference that he expects the government will receive repayment “relatively quickly” from most of the big banks helped by the $700 billion financial rescue program.

German Job Market

The jobless rate in Germany, Europe’s biggest economy, rose to 8.3 percent in October from 8.2 percent in the previous month, according to the median forecast of 25 economists in a Bloomberg survey. The jobs report is due tomorrow.

“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.

Orders for U.S. durable goods rose 1 percent in September after falling 2.6 percent the prior month, according to the median forecast of 76 economists in a Bloomberg survey. The report from the Commerce Department is due at 8:30 a.m. Washington time.

Australia’s dollar dropped 1.3 percent to 90.44 U.S. cents as a report showed inflation slowed, easing speculation the central bank will speed up rate increases.

Australia’s Inflation

The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, the Bureau of Statistics said in Sydney today.

The Reserve Bank of Australia raised the benchmark cashrate a quarter-point to 3.25 percent on Oct. 6. New Zealand’s central bank may raise interest rates as early as March next year, according to economists in a Bloomberg survey.

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, predicts 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.

To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

Last Updated: October 28, 2009 07:04 EDT