Feb. 27 (Bloomberg) -- The yen rallied against all of its major counterparts as stocks dropped and speculation the 11 percent surge in oil prices this month may weigh on economic recoveries boosted demand for safety. The euro fell by the most in more than three months against the yen and weakened against the dollar after the Group of 20 nations rebuffed European leaders' call for a boost in International Monetary Fund resources to help defuse the region's debt crisis. The Swedish krona led losses as equities fell by the most in more than a week, sapping demand for riskier assets. The yen's rise against the euro halted the longest weakening streak in two years. "It's a quiet, profit-taking day," said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. "That oil prices have skyrocketed so far so fast is making a lot of people wonder if it's going to have an impact on the U.S. consumer, and it's damping the mood. Dollar-yen is a referendum on the oil prices." The yen gained 1.5 percent to 107.54 per euro at 10:12 a.m. New York time after rising 1.8 percent, the most since Nov. 9. It broke a seven-day decline against the common currency, the longest such streak since January 2010. The Japanese currency gained 1 percent to 80.36 per dollar after earlier touching 81.67, the weakest since May 31. The euro was 0.3 percent weaker at $1.3405. ECB Pauses The euro briefly pared its loss against the dollar after the European Central Bank said today it hasn't bought any government bonds for two straight weeks, the first pause since August. The purchases have dwindled since the ECB funneled a record 489 billion euros ($655 billion) of three-year loans into the banking system in December, fueling a bond-market rally and reducing the need to intervene with its Securities Markets Program. The central bank will offer another round of unlimited three-year loans to financial institutions Feb. 29. Italian two- year notes surged today, pushing the yield to the least in almost 11 months, as borrowing costs fell at a sale of bills. Spanish two-year notes gained for an eighth day, their longest winning streak since December. "This yen strength may be temporary," said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. "I expect dollar-yen to move toward 90 over the next six months." Stocks Decline The Stoxx Europe 600 Index of shares slipped as much as 1.2 percent, the biggest drop since Jan. 30, and the MSCI Asia Pacific Index weakened 0.7 percent. The Standard & Poor's 500 Index fell 0.4 percent. Sweden's krona fell 1.7 percent to 12.17 yen and lost 0.7 percent to 6.6045 per dollar. Crude oil for April delivery rallied to $109.95 a barrel last week, the highest level since May 4. The increase in prices may weight on U.S. consumer spending, stalling the economic recovery and prompting the Federal Reserve to more seriously consider additional easing measures, GFT Forex's Schlossberg said. Oil dropped 1 percent to $108.55 today. It averaged $95.12 a barrel during 2011. The dollar erased a gain of as much as 0.6 percent versus the yen as a technical indicator suggested its recent appreciation has come too quickly. The greenback's 14-day relative strength index against Japan's currency was at 73.2, above the 70 level that some traders see as a sign an asset may be about to reverse direction. Dollar 'Pullback' "Dollar-yen is quite overbought so it is due for a pullback," said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia's second-largest lender. "You might see it pull back toward 79 yen and then press on again as it does look like dollar-yen has turned to the upside and could be at the beginning of a much longer-term uptrend." The U.S. currency will face so-called resistance near the 82 yen level with a break above that signaling a gain toward 85.60 yen, he said.

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