The dollar fell against its major counterparts as President Barack Obama said the U.S. may experience a “deep economic crisis” if leaders fail to reach a compromise on spending cuts and the nation defaults. The U.S. currency slid below 78 yen for the first time since March and fell to the weakest ever versus the Swiss franc as lawmakers struggled to reach an accord to raise the nation’s $14.3 trillion debt ceiling by an Aug. 2 deadline. The pound rallied from a two-week low against the euro after the U.K. economy expanded for a second quarter. Sweden’s krona climbed as a report showed producer prices increased. China’s yuan advanced to its strongest level in 17 years against the greenback. “The uncertainty is a clear negative for the dollar across the board,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “Until we have more news, I can’t see sentiment changing.” The dollar depreciated 0.3 percent to 78.06 yen at 7:02 a.m. in New York, after declining to 77.90, the weakest level since March 17. The greenback was down 0.5 percent to 80.23 Swiss centimes and earlier slid to an all-time low of 79.98 centimes. It weakened 0.7 percent to $1.4478 per euro after reaching $1.4522, the weakest since July 5. Obama blamed the current stalemate on a group of Republicans in the House who are insisting on budget cuts and no tax increases. “If we stay on the current path, our growing debt could cost us jobs and do serious damage to the economy,” Obama said in a prime-time address from the White House. ‘Serious Damage’ The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, fell to 73.6659 from 74.064. It earlier reached 73.526, the lowest since June 7. “Just like a meltdown at a nuclear power plant, a U.S. default will trigger an incident that’s too scary to imagine, so people can’t buy the dollar when there’s such a risk, however small,” said Daisaku Ueno, Tokyo-based president of Gaitame.com Research Institute Ltd., a unit of Japan’s largest online currency broker. “Currencies such as the Swiss franc or Japanese yen continue to be preferred.” Moody’s Investors Service cut Greece to its second-lowest rating yesterday. The European Union support package for Greece allows an “orderly default” and buys time, Moody’s said. The pound jumped 0.7 percent to $1.6398 after British economic-growth data was released. Sterling erased a drop versus the 17-nation euro, trading little changed at 88.25 pence. It earlier reached 88.84 pence, the weakest level since July 11. ‘Flicker of Hope’ The British economy expanded by 0.2 percent in the second quarter, down from 0.5 percent in the first three months of the year, the Office for National Statistics said in London today. GDP would have grown by 0.7 percent without special factors such as Japan’s earthquake, an extra holiday for the royal wedding, and unusually warm weather in April, the statistics office said. “The market was positioned for a weak number, so this flicker of hope that the U.K. isn’t about to fall back into recession helped boost sentiment to sterling,” Kathleen Brooks, London-based research director at Forex.com, a unit of online currency trading company Gain Capital Holdings Inc., wrote in a client note today. The Swedish krona appreciated against all but three of 16 major currencies tracked by Bloomberg as data showed a measure of inflation rose, bolstering the case for tighter monetary policy. Sweden’s producer prices rose 0.1 percent in June after sliding 0.9 percent in May, Statistics Sweden in Stockholm said. Krona Climbs Sweden’s currency climbed 1.1 percent to 6.2691 against the dollar, after reaching its strongest level since July 5. It was at 9.0784 against the euro, a gain of 0.4 percent. Gains in the yen were limited on speculation Japanese officials will intervene to weaken the currency. Japanese Finance Minister Yoshihiko Noda said currency moves have been one-sided and he will continue to watch the yen closely. Bank of Japan Governor Masaaki Shirakawa said yesterday that the yen’s strength could hurt the economy and the central bank is ready to take appropriate action as needed. “I’m bearish on the yen,” said Koji Fukaya, chief currency strategist at Credit Suisse Group AG in Tokyo. “To prevent the yen from strengthening beyond a record and into the 75 range, intervention should start much sooner. An intervention will be no surprise with the yen anywhere beyond 80.” Yen Intervention There were no signs that Japan’s central bank intervened in currency markets today to weaken the yen, according to traders. Japan’s currency dropped from 78.10 per dollar to as low as 78.70 within a minute at about 11:06 a.m. in Tokyo. “Substantial dollar buying seems to have triggered” automatic orders, pushing the dollar up briefly against the yen, said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate & Investment Bank in Tokyo. Group of Seven nations jointly sold the yen on March 18 after it reached a postwar record of 76.25 to the dollar the previous day, saying in a statement they wanted to reduce “excess volatility and disorderly movements.” Japan’s Finance Ministry sold 692.5 billion yen ($8.9 billion) that month in its first currency intervention since September. Yuan Appreciates The yuan rose 0.06 percent to 6.4414 per dollar in Shanghai, data from the China Foreign Exchange Trade System showed. It touched 6.4382 earlier, the strongest since the China unified official and market exchange rates at the end of 1993. South Korea’s won rose as Bank of Korea Deputy Governor Kim Jae Chun said yesterday that growth will pick up in the second half of the year and policy makers will tackle inflation. “The BOK’s comments on the economy are supportive of the won, which will likely continue its strong momentum into the second half,” said Bae Jin Chul, a Seoul-based dealer at the state-run Industrial Bank of Korea. “The market is receiving a steady flow of month-end dollar sales from exporters as well.” The won appreciated 0.4 percent to 1,051.95 per dollar. To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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