The euro fell versus the dollar and yen after Moody’s Investor Service cut Italy’s debt rating and amid speculation a slowing economy will spur the European Central Bank to boost monetary stimulus at a meeting tomorrow. The 17-nation euro snapped yesterday’s biggest gain versus Japan’s currency since April as Moody’s said European countries with debt ratings below the top Aaa level may see their rankings lowered. The dollar rose after Federal Reserve Chairman Ben S. Bernanke signaled willingness to step up measures to spur U.S. growth. The Swiss franc dropped before a report tomorrow that may show the central bank stepped up sales of the currency to halt its advance. “Worries are ongoing about the euro-zone crisis,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The Moody’s downgrade of Italy’s rating and its report on credit pressures aren’t good news. This is probably causing selling of the euro.” The euro dropped 0.4 percent to $1.3299 at 8:46 a.m. in London. The common currency slid 0.6 percent to 101.97 yen, after rising 1.6 percent yesterday, the sharpest increase since April 27. The dollar was little changed at 76.66 yen. Moody’s cut Italy’s rating to A2 from Aa2, citing concern the government will struggle to reduce the region’s second- largest debt amid weak growth. Standard & Poor’s downgraded Italy on Sept. 20 for the first time in five years. “All but the strongest euro-area sovereigns are likely to face sustained negative pressure on their ratings,” Moody’s said in a statement yesterday. “Consequently, Moody’s expects fewer countries below Aaa to retain high ratings.” Italy Rating The euro fell as traders increased bets the ECB will lower borrowing costs tomorrow tomorrow to fuel growth. Eleven of 52 economists surveyed by Bloomberg said the central bank will cut its benchmark rate by at least a quarter- percentage point from the current rate of 1.5 percent. The others expect no change. The single currency also weakened before a report today forecast to show the region’s retail sales declined in August. Sales in the euro-area dropped 0.3 percent after a 0.2 percent increase the previous month, according to the median estimate of economists surveyed by Bloomberg before the data. ‘Looking Softer’ The European economy “is looking softer on some key measures,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “They will cut rates on Thursday. We’ll see the euro more likely to be lower than higher from current levels.” Economists at Royal Bank of Scotland see a 60 percent chance the ECB will reduce interest rates by 25 basis points tomorrow, according to Gibbs. Swaps traders are betting the central bank will lower its main rate by 36 basis points over the next 12 months, according to a Credit Suisse Group AG index. That compares with a 25 basis-point increase projected at the beginning of August. The Fed can give more information about its pledge to keep interest rates low at least through mid-2013, reduce the rate paid on banks’ reserve deposits or purchase more securities, Bernanke said yesterday in testimony to Congress’s Joint Economic Committee in Washington, reiterating options he mentioned in July. Responding to a question, he said the central bank has no immediate plans for another round of large-scale asset purchases, known as quantitative easing. At the same time, he said, the Fed doesn’t take “anything off the table.” Creating Jobs Bernanke is struggling to find ways to reduce unemployment stuck at 9 percent and avert a second recession in three years after deploying unconventional stimulus tools in August and September. A survey by ADP Employer Service today will show U.S. employers added 73,000 workers in September, after hiring 91,000 the prior month, economists surveyed by Bloomberg said. The jobless rate was 9.1 percent last month, another survey showed before an Oct. 7 report from the Bureau of Labor Statistics. “Bernanke actually helped the U.S. dollar slightly by not sounding as though he’s in a hurry” to implement a third round of quantitative easing, said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia’s second-largest lender. “Momentum is definitely moving back in the dollar’s favor.” The greenback gained 7.6 percent in the past month, the second-best performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has appreciated 7.8 percent in the same period. Investors will learn how much the Swiss National Bank spent to defend the ceiling tomorrow at 9 a.m. in Zurich when it’s publishing its September foreign exchange reserves. The franc weakened against all of its 16 major peers, falling 0.4 percent against the euro to 1.22778. To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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