NEW YORK (Bloomberg) — The yen dropped against the dollar as the highest yields on 10-year US Treasury notes in a month renewed international demand for US assets as investors' risk aversion declined.

The Japanese currency slipped against a majority of its 16 most-traded counterparts and the Swiss franc declined as a report showed China's imports increased more than economists predicted. The yuan headed for its biggest weekly gain since June as the US stepped up pressure on China to allow its currency to strengthen. The difference in yields between US and Japanese 10-year notes widened from the narrowest level since April 2009.

"People are watching the difference between the US and Japan and they're more optimistic to buy the dollar due to this yield differential," said Hidetoshi Yanagihara, a senior currency trader at Mizuho Financial Group Inc. in New York. "People are getting more optimistic about the upcoming economy in the US"

The yen weakened 0.5 percent against the dollar to 84.17 in New York on Friday, from 83.78 on Thursday. It fell 0.6 percent to 106.97 per euro, from 106.37 yesterday. The euro traded at $1.2709, compared with $1.2696, after falling to $1.2644, the weakest since August 31.

The Swiss franc slid 0.5 percent to 1.2956 per euro from 1.2887 and fell 0.4 percent to 1.0195 per dollar.

The premium investors demand to own US 10-year Treasuries instead of similar-maturity Japanese debt rose to 163 basis points today, jumping 17 basis points from a low of 146 reached Sept. 7. A basis point equals 0.01 percentage point.

Chinese exports rose 34.4 percent and inbound shipments climbed 35.2 percent, leaving a $20.03 billion surplus, a customs bureau report showed today. It's the third straight month the trade surplus has stayed higher than $20 billion. A Bloomberg News economist survey predicted import gains of 27.5 percent and 35 percent for exports.

The yuan gained 0.2 percent to 6.7692 per dollar, bringing its weekly advance to 0.5 percent, according to the China Foreign Exchange Trade System. That was the biggest gain since the week ended on June 25 when it also appreciated 0.5 percent.

US Treasury Secretary Timothy Geithner said last Wednesday on Bloomberg Television that China should let the yuan rise more quickly. The US House Ways and Means Committee will discuss China's currency policy next week.

"Those advocating a tougher line against China in the US Congress may emphasise that August was the third consecutive monthly surplus above $20 billion," strategists led by Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a note to clients.

Mexico's peso gained for a third day versus the greenback as oil, one of the country's largest foreign revenue generators, rose the most in six weeks.

The peso increased 0.7 percent to 12.9252, from 13.0125.

Crude oil for October delivery climbed three percent to $76.47 a barrel. It touched $76.56, the highest level since August 17.