Nov. 9 (Bloomberg) -- The euro pared gains versus the yen on signs the global economic recovery may be slow, backing the case for the European Central Bank to keep interest rates low.

Europe’s single currency retreated from near a one-week high against the dollar on speculation a German report tomorrow will show investor confidence fell for a second month, sapping demand for higher-yielding assets. New Zealand’s dollar gained as Auckland-based Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, raised its forecast for milk prices by 19 percent amid growing global demand.

“While stimulus measures have created the green shoots of recovery, investors are still cautious,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “This view is limiting risk taking.”

The euro traded at $1.4874 as of 9:31 a.m. in Tokyo from $1.4847 in New York on Nov. 6, after earlier reaching $1.4896, near the Oct. 27 high of $1.4927. The currency fetched 133.70 yen from 133.45 yen. The dollar was at 89.89 yen from 89.88 yen.

Gains in the euro were tempered as economists surveyed by Bloomberg predicted the ZEW Center for European Economic Research in Mannheim will say its index of investor and analyst expectations, which aims to predict developments six months ahead, dropped to 55 in November from 56 in October.

Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 1 percent in the euro region and 2.5 percent in New Zealand, making the yen and dollar favored targets for investors seeking to fund carry trades.

New Zealand’s currency advanced after Fonterra said today it will probably pay its 10,500 farmer-shareholders NZ$6.05 ($4.39) for each kilogram of milk supplied in the year to May 31. That would be the second-highest since Fonterra paid a record NZ$7.90 a kilogram in the year ended May 2008.

Fonterra accounts for about 40 percent of the global trade in butter, milk powder and cheese and sells products in more than 140 countries.

The New Zealand currency rose 1.1 percent to 73.32 U.S. cents. It gained 1.2 percent to 65.91 yen.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

Last Updated: November 8, 2009 19:47 EST