July 8 (Bloomberg) -- The yen advanced to a five-week high against the dollar on speculation the global recession will sap U.S. corporate earnings, prompting Japanese investors to sell overseas assets and bring money home.

Japan’s currency also rose to a six-week high versus the euro as Asian stocks dropped on concern the worldwide slump will be prolonged, boosting demand for the relative safety of Japan’s currency. The dollar fell for a third day against the yen on speculation the greenback’s role as the world’s reserve currency will be questioned at a Group of Eight meeting starting today in L’Aquila, Italy.

“Pessimism-driven play continues as the wariness about the prospects of the U.S. economy prevails,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “The yen may reach 92 per dollar and 127 against the euro” as it attracts buying as a refuge from the global recession, he said.

The yen rose to 94.69 per dollar as of 9:09 a.m. in Tokyo from 94.89 yesterday in New York, after rising to 94.60, the strongest since June 1. Japan’s currency advanced to 131.53 per euro, after earlier climbing to 131.40, the highest since May 22. The euro traded at $1.3898 from $1.3924.

The Nikkei 225 Stock Average declined 1 percent and the MSCI Asia Pacific Index of shares fell 0.5 percent. The yen typically strengthens during times of financial turmoil as Japan’s trade surplus means the nation does not have to rely on overseas lenders.

Machine Orders

The yen stayed higher after a Japanese government report showed machinery orders, an indicator of capital investment in the next three to six months, unexpectedly declined in May. Orders fell 3 percent from April, following a 5.4 percent drop the previous month. Economists expected a gain of 2 percent, according to a Bloomberg News survey.

A separate Japanese report showed the current-account surplus narrowed for a fourth month in May, adding to signs the global economy will take time to recover. The surplus shrank 34.3 percent from a year earlier to 1.302 trillion yen ($13.8 billion), the Ministry of Finance said in Tokyo.

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Last Updated: July 7, 2009 20:12 EDT