[iouiyyut]

The yen was 0.8 percent from its weakest level in almost four months against the euro amid signs Europe will contain its debt crisis and the U.S. economic recovery is gaining pace.

The 17-nation euro held a seven-day gain, the longest stretch since 2010, after the People’s Bank of China said the nation will do its part to boost International Monetary Fund resources. Group of 20 nations said a decision to aid Europe hinges on the region delivering more financial firepower within two months. The dollar eased from a nine-month high versus the yen on signs it may have risen too rapidly. The Philippine peso fell on prospects for an interest-rate cut this week.

“Investors are feeling safe to sell the yen because the market thinks the world can avoid the worst scenario in terms of economic growth,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign- exchange margin-trading services. “The G-20 is making efforts to solve the debt crisis.”

The yen traded at 109.07 per euro as of 2:08 p.m. in Tokyo, after falling to as low as 109.93, the least since Oct. 31. The Japanese currency was at 81.10 per dollar from 81.20 last week, after touching 81.67, the weakest since May 31. The euro bought $1.3447 from $1.3448 on Feb. 24 in New York.

Futures traders cut bets that the yen will gain against the dollar to a seven-month low, figures from the Washington-based Commodity Futures Trading Commission showed last week.

Long Positions
The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 17,257 on Feb. 21, the least since July 5, compared with net longs of 29,459 a week earlier.

The yen has plunged since the Bank of Japan, which has struggled for more than a decade against deflation, said on Feb. 14 that it would aim for 1 percent annual gains in consumer prices and would add 10 trillion yen ($123 billion) to the economy.

“The BOJ seems to have shifted their stance quite aggressively,” Mansoor Mohi-uddin, the Singapore-based chief currency strategist at UBS AG, said by telephone on Feb. 24. “It’s definitely a situation where the trend is now reversed.”

Technical Resistance
The dollar erased a gain of as much as 0.6 percent versus the yen as a technical indicator suggested its recent appreciation has been too rapid. The greenback’s 14-day relative strength index against Japan’s currency was at 82, above the 70 level that some traders see as a sign an asset may be about to reverse direction.

“Dollar-yen is quite overbought so it is due for a pullback,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “You might see it pull back toward 79 yen and then press on again as it does look like dollar-yen has turned to the upside and could be at the beginning of a much longer-term uptrend.”

The U.S. currency will face so-called resistance near the 82 yen level with a break above that signaling a gain toward 85.60 yen, he said.

There are also indications the U.S. economy is improving. The number of Americans signing contracts to buy previously owned homes in January rose 1 percent from the previous month, figures from the National Association of Realtors are forecast to show today, according to a Bloomberg News survey of economists. Initial applications for jobless benefits are at a four-year low, a government report showed last week.

Firewall Review First
The euro advanced against 13 of its 16 major peers after PBOC Governor Zhou Xiaochuan cited the G-20 meeting’s communiqué as saying that it’s “positive to push forward and deliver the action plan,” including increasing IMF resources.

“China as an important member of the G-20 group will certainly do our job in this regard,” he said.

A euro-area review of its financial firewall against the region’s debt crisis is “essential” before any consideration to “mobilize resources” for the IMF, according to the statement issued at the end of the G-20 summit in Mexico City. Progress will be assessed in April, when officials gather in Washington for the IMF’s Spring meetings, the statement said.

“Should increased IMF resources be in place by April, we suspect this would represent a somewhat faster timetable than many in the market speculated in recent months,” analysts including Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York, wrote in a note to clients. “The key from the G-20 meeting is that both European and international authorities appear to be closer to upping the firewall against the sovereign debt crisis. We view this as risk positive.”

A ‘Safer Place’
European Central Bank President Mario Draghi said yesterday there are tentative signs of economic stabilization and a return of confidence in European markets. The euro is now a “safer place,” he said.

The ECB will offer a second round of unlimited three-year funds on Feb. 29. Euro-area banks will seek 470 billion euros ($632 billion), approaching the 489 billion-euro take-up by 500 banks at the first long-term refinancing operation on Dec. 21, according to the median estimate of 28 analysts surveyed by Bloomberg.

“The first LTRO helped a lot to stem a selloff in European sovereign bonds,” Ueda Harlow’s Yamauchi said. “If banks’ demand for the second batch is around the same amount, it will likely ease market anxiety further.”

The Philippine peso fell to a one-month low before the central bank’s next policy meeting on March 1. Bangko Sentral ng Pilipinas still has scope to support growth as inflation will remain within target even as fuel prices rise, Governor Amando Tetangco said on Feb. 22. Six of 10 economists predict the central bank will reduce the rate to 4 percent.

The Philippine peso fell 0.4 percent to 42.985 per dollar, according to Tullett Prebon Plc. It touched 43.11, the weakest level since Jan. 25.