Yen May Extend Losses as Recovery Signs Damp Demand for Safety

May 13 (Bloomberg) -- The yen may extend losses against higher-yielding currencies as signs the global economy is recovering damp demand for Japan’s currency as a refuge.

The euro climbed against 14 of its 16 major counterparts after American stocks rose and before reports forecast to show Australia added jobs and initial unemployment claims in the U.S. declined. The euro pared a two-day loss against the dollar as demand rose at a Portuguese debt auction and Spain announced budget reductions.

“The global economy is still recovering rather than slowing,” said Daisaku Ueno, a Tokyo-based president at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest currency margin company. “I expect cross currencies, especially commodity currencies such as the Aussie, to advance against the yen.”

Japan’s currency traded at 117.74 per euro as of 7:40 a.m. in Tokyo from 117.62 in New York yesterday, when it touched 116.57, the highest since May 7. The yen was at 93.15 per dollar from 93.24. The euro rose to $1.2639 from $1.2614. It fell to $1.2529 on May 6, the weakest level since March 5, 2009.

Australia’s dollar traded at 83.43 yen from 83.32 yen. It was at 89.54 U.S. cents from 89.36 cents.

The Standard & Poor’s 500 Index rose 1.4 percent and the Dow Jones Industrial Average gained 1.4 percent yesterday.

Australian employers added 22,500 jobs in April from March, according to the median estimate of economists in a Bloomberg News survey before the statistics bureau reports the data in Sydney today.

Debt Auction

Initial jobless claims in the U.S. fell 4,000 to 440,000 last week, another Bloomberg survey showed before the Labor Department report today.

Portugal sold 1 billion euros ($1.3 billion) of 10-year bonds yesterday, getting more demand than at previous auctions. The country’s debt agency priced the 4.8 percent bonds due 2020 to yield 4.52 percent, 181 basis points below last week’s high, which was a record since the euro’s introduction.

Spain’s Socialist Prime Minister Jose Luis Rodriguez Zapatero reversed an earlier commitment and cut public wages, acceding to pressure from the rest of Europe to reduce spending to avoid being dragged deeper into the Greek crisis. Finance Minister Elena Salgado said as recently as February that Spain would honor wage agreements with public-sector unions.

The government plans to cut public wages 5 percent this year and freeze them in 2011 while suspending a pension raise, Zapatero told parliament in Madrid yesterday. A subsidy for new parents will be scrapped and foreign aid trimmed, he said.

The euro has lost 8.3 percent this year, according to Bloomberg Correlation-Weighted Indexes. The dollar has gained 5.4 percent, and the yen has advanced 5.2 percent.