The euro fell the most in almost a month against the dollar as Moody’s Investors Service cut Portugal’s government bond rating to junk and European banks faced more stringent stress tests. The Swiss franc rose this week against all of its major counterparts as Europe’s debt crisis spurred demand for a refuge. The dollar fell against the yen for the first time in three weeks after the U.S. payrolls report showed employers added the fewest jobs in nine months. President Barack Obama prepared to meet with congressional leaders tomorrow in a rare Sunday meeting on cutting deficits and raising the debt limit. “The headline event for this week was the four-notch downgrade to Portuguese debt by Moody’s,” said Ravi Bharadwaj, a market analyst in Washington at Travelex Global Business Payments, a currency-exchange network. “It seems like a lose- lose situation for the euro-dollar right now.” The 17-nation euro fell 1.8 percent to $1.4265, from $1.4526 on July 1, after touching $1.4206 yesterday, the lowest since June 27. The drop in the currency is the biggest since the five days ended June 10, when it fell 2 percent. The euro slid 2 percent to 115.03 yen, from 117.42. The dollar slumped 0.2 percent to 80.64 yen, from 80.83. The Swedish krona was the biggest loser against the dollar, depreciating 1.9 percent to 6.3832. The krona rallied 3.7 percent last week before the Riksbank’s meeting on July 5, when policy makers increased the benchmark repurchase rate by a quarter-percentage point to 2 percent. Weaker Aussie Australia’s dollar slipped 0.1 percent to $1.0755 as China, the biggest buyer of the South Pacific nation’s raw materials, raised benchmark interest rates to cool growth. The Reserve Bank of Australia held its cash target rate at 4.75 percent. New Zealand’s currency rallied to another record, increasing 1.3 percent to 83.79, the highest since the currency was freely floated in 1985. The yen and Swiss franc got a boost yesterday after the U.S. Labor Department reported that payrolls expanded by 18,000 in June after a revised increase of 25,000 in the previous month. The median forecast of 85 economists in a Bloomberg News survey was for 105,000 more jobs. The unemployment rate unexpectedly increased to 9.2 percent, the highest level this year. “This a huge splash of cold water onto the markets with what we’ve seen with the jobs report,” Mark McCormick, a New York-based currency strategist at Brown Brothers Harriman & Co. “The U.S. economy is still experiencing sluggish growth. It just shows how bad the mini-slowdown we’ve had has been.” Swiss Refuge The franc, which benefits in times of turmoil from Switzerland’s role as a stable, neutral financial center, appreciated 3.2 percent to 1.1933 against the euro. The franc rallied to a record 1.1806 versus the shared currency June 24. Results of the second round of European stress tests will be released July 15, the European Banking Association said yesterday. Banks that fail this year’s tests may need to present plans for making up their capital shortfall by the end of September, according to an internal European Union document. Moody’s cut Portugal’s credit rating four levels to Ba2 from Baa1, below investment grade. Portugal joined Greece as the only nations in the euro regions to have junk ratings. Banks in Italy, including UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), tumbled in Milan yesterday as the contagion from Europe’s debt crisis threatened to spread to the region’s third-biggest economy. The volatility spurred Bank of Italy Governor Mario Draghi said he’s certain that the country’s lenders will pass European stress tests. ECB Rate Decision The cost of insuring against default on Portuguese, Irish and Greek government debt rose yesterday to records. Contracts on Portugal climbed 38 basis points to 1,016, signaling a 58 percent probability of default within five years, according to CMA prices in London. Implied volatility on one-month options for the euro-dollar exchange rate rose 1.6 percent this week to 11.66 percent, increasing four out of five days. The euro rose against the dollar on July 7, when the European Central Bank raised the benchmark interest rate by a quarter-percentage point to 1.5 percent and signaled further increases. “Our monetary policy stance remains accommodative,” ECB President Jean-Claude Trichet said at a press conference in Frankfurt, also saying that the central bank will loosen collateral rules for Portuguese bonds. To contact the reporters on this story: Joe Ragazzo in New York at jragazzo@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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