The dollar rallied versus 15 of its 16 most-traded counterparts as concern the world’s largest economy is stalling and Europe’s debt crisis is worsening damped demand for higher-risk assets. Standard & Poor's cut the nation's AAA rating to AA+ after markets closed yesterday. The Swiss franc climbed to records versus the dollar and euro this week as European leaders sought to stem the spread of sovereign fiscal trouble. The greenback pared gains yesterday after data showed U.S. employers added more jobs than projected in July. The Federal Reserve, which meets Aug. 9, still is forecast to keep interest rates unchanged until mid-2012. “We may have reached a peak of panic this week, and next week we could see a bit of a recovery going forward, assuming data doesn’t deteriorate,” said Boris Schlossberg, research director at the online currency trader GFT Forex in New York. The U.S. jobs report “is going to provide a little bit of a foundation for consolidation,” he said. The dollar strengthened versus the euro for the first week in three, gaining 0.8 percent to $1.4282 in New York, from $1.4398 on July 29. It rose for the first time in five weeks against the yen, appreciating 2.1 percent to 78.40, the biggest jump since April 1. The yen fell 1.3 percent versus Europe’s 17- nation currency to 111.97 yen. The Swiss currency gained 2.4 percent to 76.74 centimes per dollar and touched a record 75.79 centimes. It rose 1.8 percent to 1.0954 francs per euro and reached 1.0711. Jobless Rate Drops The greenback slid versus the euro yesterday to the lowest level since July 18, $1.4055, as the Labor Department’s payrolls report damped investor demand for refuge. U.S. employers added 117,000 jobs after a 46,000 increase in June that was more than originally estimated, the data showed. The median estimate in a Bloomberg News survey called for a gain of 85,000. The jobless rate dropped to 9.1 percent, from 9.2 percent. “Until this thing gets a full head of steam up, the market will still be cautious of the world economy, but this does give some glimmer of hope and some relief,” said Brian Taylor, chief currency trader at Manufacturers & Traders Trust Co. in Buffalo, New York. The “9.1 percent unemployment is not a good rate. We still have a long way to go,” he said. U.S. gross domestic product grew at a 1.3 percent pace from April through June, less than forecast, after almost stalling in the first quarter as consumers retrenched, government data showed on July 29. President Barack Obama signed a bill Aug. 2 that raised the nation’s debt ceiling until 2013 and calls for $2.4 trillion in spending reductions over the next 10 years amid concern the cuts will weigh on the economy. After markets closed S&P cut the U.S. from AAA, citing the failure by lawmakers to cut spending enough to reduce record deficits. “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics,” S&P said in a statement. Aussie Tumbles Australia’s dollar dropped versus all of its most-traded counterparts as risk appetite faded and the nation’s central bank lowered its forecast for growth. The Aussie fell 5.2 percent, the most since May 2010, to $1.0443. It weakened 3 percent to 81.87 yen. U.S. equities trimmed losses yesterday as Italian Prime Minister Silvio Berlusconi vowed the nation will accelerate financial reforms as investors flee Italian bonds. The move came amid speculation the European Central Bank will buy Italy’s government debt to help stave off the debt crisis. “The pressure and desire for risk-proof assets was lessened by” speculation the ECB would buy Italian and Spanish government bonds, said Joseph Trevisani, chief market analyst at FX Solutions Inc. in Saddle River, New Jersey. Record Yields A divided ECB restarted a bond-buying program Aug. 4 after a four-month hiatus. It refused to extend the purchases to Italy and Spain, the two countries at the center of Europe’s current turmoil, sending yields on 10-year Italian debt to a euro-area record and keeping Spanish yields at almost a record. While yesterday’s employment data may provide a boost to U.S. markets, Fed policy makers will likely need more proof the economy is strengthening before they alter their views on interest rates, said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. The Fed won’t raise its benchmark interest rate until the third quarter of 2012, according to a Bloomberg survey of 47 economists and analysts. Fed fund futures on the CME Group Inc. index indicate traders are pushing back expectations until 2013. The rate has been zero to 0.25 percent since December 2008. ““We need to have a lot of data before they get into tightening mode,” Nordvig said in a telephone interview. “Our call has been 2013 for a long time, and we haven’t moved that too much.” ‘Gauntlet’ From SNB The franc touched a record versus the dollar yesterday even after Swiss National Bank President Philipp Hildebrand told Neue Zuercher Zeitung policy makers won’t exclude any measures to curb the currency’s advance. The bank on Aug. 3 lowered its target for the three-month London interbank offered to weaken the currency and protect Switzerland’s economy. “Hildebrand has thrown down the gauntlet,” said Yra Harris, chief trader and analyst at Praxis Trading in Chicago. “Markets are going to push at him until he shows that they have a real plan for weakening the currency.” The yen dropped by the most since October 2008 against the dollar on Aug. 4 after the Bank of Japan unexpectedly sold the currency to stem gains that threaten the nation’s economic recovery. It fell as much as 4.1 percent to 80.24 per dollar. It gained 0.6 percent yesterday to 78.40. The dollar is the worst performer this year among 10 developed-nation currencies, according to Bloomberg Correlation- Weighted Currency Indexes, falling 6.3 percent. The biggest winner is the franc, up 17 percent. To contact the reporters on this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net; Joe Ragazzo in New York at jragazzo@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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