NEW YORK (Bloomberg) — The yen strengthened against the euro as global stocks fell last week after weak economic data encouraged investors to leave higher-yielding assets.

Japan's currency also rose this week against the Norwegian krone and the South African rand after the US unemployment rate rose to the highest level since 1994. The dollar rose last week against the euro.

"Swings in risk appetite are the primary focus among investors," said Todd Elmer, a currency strategist at Citigroup Global Markets in New York. "We should expect some further yen appreciation, but that is likely to be more measured than what we've seen over the last several weeks."

The yen rose 0.2 percent to 98.24 per dollar, from 98.46 on October 31. The currency rose 0.3 percent to 124.90 per euro from 125.30. The euro fell 0.1 percent against the dollar to $1.2718 from $1.2726.

Canada's dollar gained two percent against the greenback this week after the government in Ottawa reported on Friday that the nation's employers unexpectedly added jobs in October. The International Monetary Fund predicted last week that all of the Group of Seven industrialised economies except Canada will contract next year.

The yen rose 2.9 percent to 14.22 against the Norwegian krone this week and rose 4.1 percent to 9.66 against the South African rand as the drop in stocks this week encouraged investors to exit carry trades in which they get funds in a country with low borrowing costs and buy higher-yielding assets elsewhere. Japan's 0.3 percent target lending rate compares with 4.75 percent in Norway and 12 percent in South Africa.

Futures on the Chicago Board of Trade showed a 97 percent chance the Fed will cut in half its one percent target rate for overnight lending between banks at its December 16 meeting, compared with 55 percent odds a week ago. The contract may not be as precise an indicator as in the past as the effective rate, a volume-weighted average of trades between major brokers for overnight funds, approaches zero.

The euro fell against the dollar, yen and pound on Friay after European Central Bank President Jean-Claude Trichet said the economy "weakened significantly" and the International Monetary Fund cut growth forecasts for the region. The ECB reduced its main refinancing rate by a half-percentage point to 3.25 percent and Trichet said more reductions may follow.

The pound fell 2.7 percent to $1.5643 and dropped 2.6 percent to 81.31 pence against the euro this week after the Bank of England cut its main rate by 1.5 percentage points to three percent the same day the ECB cut borrowing costs.

The yen may rally to 80 per dollar on the unwinding of the carry trade, according to Eisuke Sakakibara, who was dubbed "Mr. Yen" during his 1997-1999 tenure as the nation's top currency official because of his influence over currency markets. Japan will benefit because a strong currency will hold down prices for raw materials, he said in an interview on Bloomberg Television in Singapore this week.

"I still believe a strong yen is in the national interest of Japan," Sakakibara said.

The yen's 14 percent increase against the dollar this year and 30 percent advance versus the euro prompted Finance Minister Shoichi Nakagawa to say last week that the government was ready to act as needed to limit the gains.