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Yen Strengthens Versus Most Major Peers as Investors Seek Safety

The yen rose against most major counterparts as investors sought refuge after data showed China’s export growth collapsed, fueling speculation the global economy is slowing.

Sweden’s krona climbed to the strongest level against the euro since 2000 amid demand for safety. The euro weakened as Germany’s economy ministry said the outlook for faster growth was fading amid the currency bloc’s debt crisis. The Australian dollar fell versus most peers on concern the slowdown in China, its top trading partner, will deepen.

“The weaker numbers raise questions about Chinese growth momentum,” Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, said in a telephone interview. “It suggests Chinese growth is not yet stabilizing.”

The yen gained 0.5 percent to 96.17 per euro at 5 p.m. New York time, extending its weekly advance to 1.1 percent. Japan’s currency strengthened 0.4 percent to 78.28 per dollar. Europe’s 17-nation currency fell 0.1 percent to $1.2289, after dropping earlier as much as 0.5 percent. It lost 0.8 percent for the week, its first five-day decline since July 20.

The Swedish krona advanced as much as 0.7 percent to 8.1784 per euro, its strongest since June 2000, before trading at 8.1821, up 0.6 percent. It appreciated 0.4 percent to 6.6575 per dollar. Sweden, one of only 12 nations ranked AAA at the three biggest credit-rating companies, has seen its currency strengthen after emerging as a haven from Europe’s debt turmoil.

Pound Rises

Sterling also gained versus the greenback, rising 0.3 percent to $1.5690. It weakened earlier after a report showed U.K. producer prices stalled last month.

China’s exports rose 1 percent in July from a year earlier, following an 11.3 percent increase in June, the customs bureau said in Beijing. That compared with the median estimate of economists for an 8 percent gain.

Australia’s dollar fell from the strongest level in more than four months as the Chinese report damped the outlook for the South Pacific nation’s exports. The data outweighed the Reserve Bank of Australia’s decision to raise its 2012 growth forecast on stronger-than-expected consumer demand.

“A relatively hawkish RBA monetary policy report would have typically driven a rally,” Camilla Sutton, head of currency strategy at Bank of Nova Scotia in Toronto, wrote today in a note to clients. “However, today this was overshadowed by China’s data.”

The Australian currency slid as much as 0.8 percent to $1.0497 before trading little changed at $1.0577. It rose yesterday to $1.0613, the strongest since March 20.

‘Fragile’ Outlook

The prospect of global recovery is “fragile,” Germany’s economy ministry said in its report for August. The nation’s economy “moderately” expanded in the second quarter compared with the first quarter, it said.

Economists surveyed by the European Central Bank cut their growth projection for the region next year to 0.6 percent from 1 percent, according to the institution’s monthly bulletin released yesterday.

“There’s plenty of doom and gloom on the growth front,” said Jane Foley, a senior currency strategist at Rabobank International in London.

The euro erased its decline against the greenback today as risk aversion moderated. Stocks pared losses amid speculation China might add monetary stimulus to its economy. The Standard & Poor’s 500 Index rose 0.2 percent after falling as much as 0.5 percent.

Bank Bets

“When you have data like what came out of China last night, which is weaker than expected, markets are going to anticipate that the central bank will come in and do more to ease policy and support markets.”,” Eric Viloria, senior currency strategist at Gain Capital Group LLC in New York, said in a telephone interview.

The euro weakened 5.3 percent in the past six months, the biggest decline among 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The dollar rose 2.4 percent, and the yen gained 1.5 percent.

The Canadian dollar declined against the greenback for the first time in six days, snapping its longest winning streak since December, as payrolls unexpectedly shed 30,400 jobs in July. The currency, nicknamed the loonie for the image of the waterfowl on the one-dollar coin, fell as much as 0.6 percent, its biggest intraday drop since July 23, before trading at 99.11 cents per U.S. dollar.

“All of a sudden, you’ve seen numbers suggesting that maybe growth is still decelerating,” Westpac’s Franulovich said. “That would be a big disappointment for commodities, particular for oil, which is a big deal for the Canadian dollar.”

Futures on crude oil, Canada’s biggest export, dropped as much as 1.8 percent to $91.71 a barrel in New York.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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