By Ben Levisohn March 19 (Bloomberg) -- The dollar and the yen rose against most major counterparts as India unexpectedly raised interest rates and the Dow Jones Industrial Average fell for the first time in nine days, damping demand for assets linked to growth. The euro recorded its biggest weekly drop against the dollar since January as concern Greece will fail to secure financial assistance from the European Union lowered appetite for the currency. Sterling tumbled versus all of its most-traded counterparts tracked by Bloomberg after Bank of England policy maker Andrew Sentance said Britain may return to recession. Commodities fell. “The stock market has been on a fantastic tear, and investors are shifting to safer assets,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Corporate Bank Ltd in New York. “The Greece problem is far from over. That will keep the euro under pressure versus the dollar.” The 16-nation European currency fell 0.5 percent to $1.3536 at 4:34 p.m. in New York, from $1.3608 yesterday. It lost 1.7 percent this week, the most since a 2 percent drop for the five days ended Jan. 29. The euro depreciated 0.3 percent for the day and 1.7 percent for the week to 122.58 yen. The dollar rose 0.2 percent to 90.56 yen and was little changed on the week. India’s interest-rate increase spurred speculation withdrawals of economic stimulus measures will curtail global growth. The Dow fell 0.5 percent, and the Reuters-Jefferies CRB index of commodities slid 1.1 percent. India’s Increase The Reserve Bank of India said controlling price gains became “imperative” after inflation accelerated to a 16-month high. It increased the benchmark reverse repurchase rate to 3.5 percent from a record-low 3.25 percent and the repurchase rate to 5 percent from 4.75 percent, according to a statement in Mumbai. The decision came a month before the bank’s scheduled policy meeting. The increases are “likely to be interpreted by markets as a sign that other Asian central banks will follow shortly,” Thio Chin Loo, a senior currency strategist at BNP Paribas SA in Singapore, wrote in a note to clients. “Indeed, commodity currencies across the world suffered immediately after the decision.” South Africa’s rand declined against the greenback as lower precious-metals prices curbed the nation’s earnings prospects. The currency weakened for a second day, losing as much as 0.9 percent to 7.3727, from 7.3101 yesterday. Gold for April delivery snapped a four-day climb, falling 1.9 percent to $1,105.80 an ounce on the Comex in New York as a stronger dollar eroded its appeal as an alternative investment. Assistance to Greece The euro fell for the week against 14 of its 16 most-traded counterparts after Greek Prime Minister George Papandreou said yesterday he may turn to the International Monetary Fund unless EU leaders agree to set up a lending facility at a March 25-26 summit. French President Nicolas Sarkozy and European Central Bank President Jean-Claude Trichet say that would show the EU can’t solve its own crises. German Chancellor Angela Merkel told parliament on March 17 the IMF may be the only answer to Greece’s fiscal problems. Greece needs to raise about 10 billion euros ($13.6 billion) to refinance bonds due on April 20 and May 19. Papandreou said the nation can’t afford to keep paying current market rates. ‘Last Resort’ Columbia University Professor Robert Mundell, a Nobel Prize-winning economist, said the IMF should only be a “lender of last resort” for European nations debating how to help Greece end its budget crisis. The euro is still in “safe territory” and would benefit the region if it fell to $1.25 to $1.30, Mundell said in an interview today on Bloomberg Television. Brazil’s real posted a 2 percent weekly drop versus the dollar after the nation’s central bank left interest rates unchanged on March 17. The decision surprised 30 of 57 analysts surveyed by Bloomberg who forecast an increase to at least 9 percent to stem inflation as Latin America’s biggest economy recovers. The real fell 0.4 percent to 1.7995 per dollar, from 1.7917 yesterday. “Inflation in January and February surpassed our projections and the expectations of the market,” Nilson Teixeira, an economist in Sao Paulo at Credit Suisse Group AG, wrote in a note to clients today. The firm said policy makers will probably raise the overnight lending rate to 10.75 percent by year-end, up from a previous forecast of 10.25 percent. Sterling fell for a second day against the dollar and for the first time in four days versus the euro after Sentance told CNBC there’s “some risk of a double-dip recession” and that the U.K. will need a “substantial” fiscal tightening. ‘Pretty Bad’ Investor Jim Rogers, chairman of Singapore-based Rogers Holdings, said he is shunning sterling because of the U.K.’s trade deficit. “Things are pretty bad for sterling for the long, long, long term,” Rogers said in an interview with Bloomberg Television today. “I cannot imagine buying sterling back unless it gets really cheap.” The pound dropped 1.5 percent to $1.5016 and slid 1 percent to 90.16 pence per euro. To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net

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