The yen strengthened against all of its 16 most-traded peers as investors sought safety amid a drop in Asian stocks after disappointing Japanese corporate earnings.

The Bloomberg Dollar Index headed for a five-day decline amid bets the Federal Reserve won’t signal a change next week in monetary stimulus. Japanese government 10-year bonds, which are sensitive to inflation, rose even as data showed consumer prices gained the most since 2008. The Japan-U.S. yield gap was little changed. South Africa’s rand slid as China ordered cuts in excess production capacity, dimming export prospects.

“What you do have are some jitters in the equity space, which then has an impact on dollar-yen,” Sebastien Galy, a senior foreign-exchange strategist in New York at Societe Generale SA, said in a telephone interview. “If you look at the yield differential, it hasn’t really budged.”

The yen climbed 1.2 percent to 98.15 per dollar at 12:40 p.m. New York time and touched 97.96, the strongest level since June 27. It has rallied 2.6 percent this week. Japan’s currency appreciated 1.1 percent to 130.34 per euro, extending this week’s advance to 1.5 percent. The dollar was little changed at $1.3278 per euro.

A gauge of price fluctuations among Group-of-Seven currencies fell for a fifth week, the longest stretch in a year. JPMorgan Chase & Co.’s G-7 Volatility Index declined to 9.47 percent after touching 9.11 percent on July 24, the lowest intraday level since May 9. It has lost 3.7 percent on the week.

Currency Indexes

The yen strengthened 1 percent in the past three months among 10-developed nation currencies tracked by Bloomberg Correlation Weighted Indexes, trimming its 2013 decline to 9.3 percent. The dollar advanced 1.2 percent since April, and the euro rose 3.3 percent.

The South African rand slid versus most major peers as China ordered more than 1,400 companies to cut excess production capacity, dimming prospects for the country’s exporters. The currency dropped 0.7 percent to 9.7833 to the greenback.

Brazil’s real also weakened on the Chinese announcement amid bets commodities exports will be hurt. The currency depreciated 0.4 percent to 2.2522 reais per dollar.

Trading in over-the-counter foreign-exchange options totaled $14 billion, compared with $29 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $4.9 billion, the largest share of trades at 36 percent. Options on the euro- dollar rate totaled $1.7 billion, or 13 percent.

Dollar-yen options trading was 14 percent below the average for the past five Fridays at a similar time in the day, according to Bloomberg analysis. Euro-dollar options trading was 43 percent less than average.

Fed Meeting

The Bloomberg Dollar Index headed for its third weekly decline before the Federal Open Market Committee holds its next meeting July 30-31.

Policymakers will maintain their monthly bond-buying at $85 billion, according to 54 economists surveyed by Bloomberg News from July 18-22. Half of those polled said Chairman Ben S. Bernanke will trim purchases in September to $65 billion. The purchases tend to devalue the greenback.

The currency index, which tracks the dollar against 10 major peers, was at 1,023.30, down 0.9 percent on the week. It was little changed today.

The Thomson Reuters/University of Michigan final index of U.S. consumer sentiment increased to 85.1 in July, from 84.1 the prior month.

‘Under Pressure’

“The dollar remains under pressure,” BNP Paribas SA currency strategists Steven Saywell and Michael Sneyd in London wrote in a note to clients. “While the arguments for a firmer dollar in the third quarter remain sound, risk-reward is not attractive for new dollar longs heading into next week.” A long position is a bet an asset will rise.

Japanese stocks fell. Chipmaker Advantest Corp. plunged 9.7 percent after posting a 3.6 billion yen ($36 million) loss. JFE Holdings Inc., Japan’s No. 2 steelmaker, slid 8.3 percent after forecasting current profit that missed analyst estimates. The Topix equities index sank 2.9 percent, the most since June 13.

The nation’s 10-year government-bond yields declined two basis points, or 0.02 percentage point, to 0.79 percent. They were 1.78 percentage points less than comparable U.S. Treasurys, little changed from yesterday. The gap was 1.67 percentage points at the end of last week.

Japan Inflation

Consumer prices in Japan excluding fresh food climbed 0.4 percent in June from a year earlier, the statistics bureau said in Tokyo. The median estimate of economists surveyed by Bloomberg News was for an increase of 0.3 percent.

“We had the inflation data in Japan which was a bit higher than expected, and that’s reducing expectations of further monetary easing and giving a lift to the yen,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “The dollar is on the defensive before the Fed meeting next week because people think the Fed may be a little bit more dovish.”

Three-month volatility for the yen versus the dollar rose for a third day, climbing to 12.2 percent. The gauge fell to 11.5 percent on July 24, the lowest level since May 22, after rising June 13 to a two-year high of 16.6 percent.

The Japanese currency has weakened 7.5 percent over the past six months against the dollar as officials have pushed to end deflation.