Forex - Yen extends decline as stocks rally

The euro climbed nearly 2 percent against the yen on Friday as a rally in global stocks fuelled appetite for riskier trades, putting the low-yielding Japanese currency under pressure.

Gains in high-yielding units such as the New Zealand dollar also underscored improved risk appetite as stocks rose across Europe and Asia, with Japan's benchmark Nikkei .N225 surging more than 4 percent in its biggest one-day gain in about six years.

Stock investors were cheered by a U.S. tax stimulus package, reassuring U.S. jobs data and the prospect of another Federal Reserve rate cut next week, all tending to ease fears that the world's biggest economy will slide into recession.

"You have a combination of dollar weakness and yen weakness with yen making more significant losses against other currencies, which fits in with the events that have unfolded over the last 24 hours," said Steve Barrow, currency strategist at Bear Stearns.

Stock market moves are often regarded as a barometer of risk appetite, and financial markets have calmed down after swinging wildly earlier in the week on an emergency interest rate cut by the Federal Reserve and escalating fears of a U.S. recession.