May 13 (Bloomberg) -- The yen weakened against the dollar and the euro in Asia as the Nikkei 225 Stock Average declined for the first day in three, curbing demand for the nation's currency.

The Nikkei fell as much as 2.3 percent after yesterday having its biggest gain this year. The key average had fallen on Monday for a sixth day, its longest decline in 14 months. The slump prompted speculation demand for Japanese shares from global investors may wane after they plowed a record amount into the shares in the year ended March 31.

``When the Nikkei falls, it's hard to buy yen,'' said Hideyuki Tsukamoto, foreign exchange manager in Tokyo at Mizuho Bank Ltd., a unit of Japan's biggest lender. ``The slide in the Nikkei is triggering concern capital inflow into Japan will slow, hurting the yen.''

Against the dollar, Japan's currency fell to 113.69 at 11:13 a.m. in Tokyo from 112.98 late yesterday in New York, according to EBS, an electronic foreign-exchange dealing system. It also dropped to 135.58 per euro from 134.37. It earlier declined to as far as 135.85, its weakest since March 13.

The Nikkei has dropped 9.7 percent after on April 26 reaching the highest since August 2001. Overseas investors sold 103.6 billion yen ($911 million) of Japanese equities during the week ended March 30, the biggest net sales since December.

International investors bought a record 14 trillion yen of Japanese shares in the fiscal year ended March 31, helping spark a 47 percent stock rally during the period, according to Ministry of Finance figures.

To contact the reporter on this story: Taizo Hirose in Tokyo at Or hirose2@bloomberg.net

Last Updated: May 12, 2004 22:24 EDT