(Bloomberg) -- The yen weakened for a fourth day against the dollar as stocks advanced and signs the recession is easing spurred investors to buy riskier assets.

The Japanese currency also fell against higher-yielding currencies including South Africa’s rand after China’s manufacturing expanded for the first time in nine months and the MSCI World Index climbed 0.4 percent, its fourth straight gain. The dollar rose against the euro before a U.S. report tomorrow that may show an improvement in service industries, which account for almost 90 percent of the world’s largest economy.

“It’s difficult to be optimistic for the yen at a time when risk aversion is declining,” said Michael Klawitter, a currency strategist with Dresdner Kleinwort in Frankfurt. “Downward momentum in the economy seems to be slowing.”

The yen weakened to 99.33 per dollar as of 7:57 a.m. in New York from 99.11 on May 1, after earlier trading at 99.57, near its lowest level since April 17. Japan’s currency was little changed at 131.49 per euro, from 131.54. The dollar advanced to $1.3240 per euro from $1.3273.

The Institute for Supply Management’s index of non- manufacturing businesses probably climbed to 42 in April, according to a Bloomberg survey of economists. Readings below 50 signal contraction. The Tempe, Arizona-based group will release the figures tomorrow.

Fluctuations of the yen versus the dollar fell, a sign investors are betting the rally in riskier assets will continue, according to data compiled by Bloomberg. Volatility calculated from one-month yen options was 13.9 percent, from 18.5 percent by the end of last month and a high of 41.8 percent Oct. 24.



Euro’s Slide

The euro declined versus the dollar after Germany’s Federal Statistics Office in Wiesbaden said that retail sales, adjusted for inflation and seasonal swings, unexpectedly fell 1 percent in March from February and the European Commission cut its forecasts for economic growth, predicting a 4 percent contraction in 2009 and 0.1 percent decline in 2010.

The shrinking 16-nation economy will prompt the European Central Bank to lower the main refinancing rate by 25 basis points to 1 percent on May 7, according to the median forecast of 44 economists surveyed by Bloomberg.

“The euro is trading at the upper end of its range, so who wants to bet on the euro before the ECB event this week?” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “‘Stock markets have rallied since the start of April and the euro is flat.”

The dollar will trade at $1.315 by the end of the week, Chandler said.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net