Nov. 8 (Bloomberg) -- The yen strengthened against the euro as global stocks fell this week after weak economic data encouraged investors to leave higher-yielding assets.

Japan's currency also rose this week against the Norwegian krone and the South African rand after the U.S. unemployment rate rose to the highest level since 1994. The dollar rose this week against the euro.

``Swings in risk appetite are the primary focus among investors,'' said Todd Elmer, a currency strategist at Citigroup Global Markets in New York. ``We should expect some further yen appreciation, but that is likely to be more measured than what we've seen over the last several weeks.''

The yen rose 0.2 percent to 98.24 per dollar, from 98.46 on Oct. 31. The currency rose 0.3 percent to 124.90 per euro from 125.30. The euro fell 0.1 percent against the dollar to $1.2718 from $1.2726.

Canada's dollar gained 2 percent against the greenback this week after the government in Ottawa reported yesterday that the nation's employers unexpectedly added jobs in October. The International Monetary Fund predicted this week that all of the Group of Seven industrialized economies except Canada will contract next year.

The yen rose 2.9 percent to 14.22 against the Norwegian krone this week and rose 4.1 percent to 9.66 against the South African rand as the drop in stocks this week encouraged investors to exit carry trades in which they get funds in a country with low borrowing costs and buy higher-yielding assets elsewhere. Japan's 0.3 percent target lending rate compares with 4.75 percent in Norway and 12 percent in South Africa.

Equity Declines

The Standard & Poor's 500 Index dropped 3.9 percent this week on speculation the global slump will deepen. The index pared a daily gain yesterday after President-elect Barack Obama said at a news conference that there's no quick fix for the economy. Europe's Dow Jones Stoxx 600 Index declined 1.1 percent this week.

Futures on the Chicago Board of Trade showed a 97 percent chance the Fed will cut in half its 1 percent target rate for overnight lending between banks at its Dec. 16 meeting, compared with 55 percent odds a week ago. The contract may not be as precise an indicator as in the past as the effective rate, a volume-weighted average of trades between major brokers for overnight funds, approaches zero.

U.S. employers eliminated 240,000 jobs last month after shedding 284,000 positions in September, the Labor Department reported yesterday in Washington. The median forecast of 78 economists surveyed by Bloomberg News was for a decline of 200,000 in October. The unemployment rate increased to 6.5 percent from 6.1 percent in the previous month.

Weak Housing Market

In a sign the U.S. housing market remains weak, the National Association of Realtors said yesterday in Washington that its index of signed home purchase agreements, or pending home resales, fell 4.6 percent in September.

The euro fell against the dollar, yen and pound yesterday after European Central Bank President Jean-Claude Trichet said the economy ``weakened significantly'' and the International Monetary Fund cut growth forecasts for the region. The ECB reduced its main refinancing rate by a half-percentage point to 3.25 percent and Trichet said more reductions may follow.

The pound fell 2.7 percent to $1.5643 and dropped 2.6 percent to 81.31 pence against the euro this week after the Bank of England cut its main rate by 1.5 percentage points to 3 percent the same day the ECB cut borrowing costs.

Yen Rally

The yen may rally to 80 per dollar on the unwinding of the carry trade, according to Eisuke Sakakibara, who was dubbed ``Mr. Yen'' during his 1997-1999 tenure as the nation's top currency official because of his influence over currency markets. Japan will benefit because a strong currency will hold down prices for raw materials, he said in an interview on Bloomberg Television in Singapore this week.

``I still believe a strong yen is in the national interest of Japan,'' Sakakibara said.

The yen's 14 percent increase against the dollar this year and 30 percent advance versus the euro prompted Finance Minister Shoichi Nakagawa to say last week that the government was ready to act as needed to limit the gains.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net

Last Updated: November 8, 2008 08:00 EST