The euro rallied from a decade low against the yen, paring its biggest weekly drop since May, as the Group of 20 nations pledged a “strong and coordinated” response to challenges facing the global economy. The 17-nation currency trimmed earlier gains against the U.S. dollar after Moody’s Investors Service lowered the credit ratings on eight Greek banks by two levels. The Australian and New Zealand dollars rose as Asian stocks pared declines before meetings of the International Monetary Fund and World Bank. If the G-20 statement “is enacted, that’s a major, important step and that could provide a floor for risk appetite and for confidence,” said Callum Henderson, global head of foreign-exchange research in Singapore at Standard Chartered Plc. “The good news is the euro is not collapsing.” The euro gained to 102.96 yen at 7:06 a.m. in London from 102.64 in New York yesterday. The shared currency fell to as low as 102.22 yesterday, the least since 2001. It traded at $1.3494 from $1.3465 yesterday, when it reached $1.3385, its lowest since Jan. 19. Japan’s currency fetched 76.30 per dollar from 76.24. The MSCI Asia-Pacific excluding Japan index of shares lost 2.5 percent, after earlier falling as much as 3.1 percent. Markets in Japan are closed for a holiday. The Standard & Poor’s 500 index of U.S. stocks slid 3.2 percent yesterday. G-20 ‘Committed’ The G-20 nations are “committed to a strong and coordinated international response to address the renewed challenges facing the global economy, notably from heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment,” finance chiefs said in a statement released after talks in Washington. Today’s euro advance snapped five days of losses versus the yen and trimmed its decline since Sept. 16 to 2.8 percent. It pared its weekly fall versus the dollar to 2.2 percent. Traders sold the common currency this week on concern Europe won’t contain its debt crisis, even after Greece accelerated budget cuts to qualify for next month’s payment under a 110 billion-euro ($149 billion) international bailout. Moody’s today downgraded the long-term deposit and senior debt ratings of eight rated Greek banks by two levels. ‘Not Encouraging’ European Central Bank Governing Council member Klaas Knot said he no longer excludes a Greek default, Het Financieele Dagblad reported, citing an interview. “I am now less definite in excluding a default bankruptcy than I was a few months ago,” Knot was cited as saying by Dagblad. “I’ve long been convinced that bankruptcy is not necessary. The news from Athens, however, is not encouraging.” The ECB may act to address risks to growth as soon as next month should economic data disappoint, Governing Council member Luc Coene said in an interview yesterday. Potential measures include the reintroduction of longer- term bank loans, with maturities of 12 months or even longer, Coene said. He added that cutting the benchmark rate “certainly would not help” in bringing down longer-term rates. The dollar and yen advanced versus most major peers this week as concerns about global growth spurred demand for safer assets. “The U.S. dollar is benefiting from a flight to safety to U.S. Treasuries,” said Lee Wai Tuck, a currency strategist at Forecast in Singapore. “The dollar will benefit, and yen will benefit as well. The yen appreciated 4.5 percent in the past week, the best performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency indexes. The dollar, the second-best performer, gained 3.8 percent. Asian Intervention The euro was boosted by speculation Asian central banks were active in currency markets after the region’s currencies slumped this week against the dollar, said Charles Han, Hong Kong-based director of foreign-exchange trading at Newedge Financial HK Ltd. ‘‘Not only have they been buying euro but also, in Korea specifically, they’ve been selling dollars to help smooth volatility,” Han said. South Korea’s won headed for its worst week in 16 months, prompting authorities to say they will intervene to slow the decline. The finance ministry said it will “take action” to stabilize the currency market, after holding an emergency meeting with the central bank before markets opened. “The herd behavior on one-way bets has been excessive in the recent currency market,” the ministry said. The won tumbled 4.7 percent this week, the biggest weekly slump since May 2010, to 1,167.31 per dollar, according to data compiled by Bloomberg. To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

Source