By Yasuhiko Seki and Yoshiaki Nohara Dec. 18 (Bloomberg) -- The euro rose against the dollar, ending three days of losses, after Reuters reported that Pakistan denied a coup had taken place in the country, reviving demand for higher-yielding assets. The euro also gained before a German report forecast to show business confidence rose to the highest since July 2008. The yen strengthened on speculation Japanese exporters are repatriating profits before the year-end. The Bank of Japan held its benchmark rate at 0.1 percent, as forecast by economists. “We saw a typical case of rollercoaster-like moves revolving around developments in Pakistan,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a foreign-exchange unit of Japanese trading house Itochu Corp. “Sharp declines in trading volume before the Christmas holiday season amplified price fluctuations.” The euro rose to $1.4396 as of 1:54 p.m. in Tokyo from $1.4338 in New York yesterday after earlier falling as low as $1.4306. The euro rebounded to 128.64 yen from 129 yen, after earlier dropping to 127.54 yen, the weakest since Nov. 27. The yen rose to 89.35 per dollar from 89.96. The euro was at 1.4966 Swiss francs from 1.5020 yesterday after earlier touching 1.4909, the lowest since March 12. Sovereign Concern A Pakistani presidential spokesman denied a coup occurred after the defense minister was forbidden to leave the country, Reuters said. “There is no coup,” spokesman Farhatullah Babar was quoted as saying by Reuters. The euro reached the weakest in nine months against Switzerland’s currency and is poised for the longest stretch of weekly declines since March against the greenback. Standard & Poor’s this week cut Greece’s credit rating to BBB+ from A-and signaled it may lower the score again. Fitch Ratings downgraded Greece to BBB+ on Dec. 8, raising concern among investors that the worst global recession since World War II is still weighing down some economies. S&P yesterday cut long-term credit ratings for Greek banks EFG Eurobank Ergasias and Alpha Bank AE by one level to BBB, and put those ratings on “creditwatch negative,” signaling S&P may reduce them further. Greece’s Prime Minister George Papandreou said yesterday he’s determined to turn around the country’s economy and that a default is “simply out of the question.” Austria said on Dec. 14 that it was nationalizing Hypo Alpe-Adria Bank and injecting as much as 450 million euros ($649 million) into the lender. “Mounting wariness about credit woes in the euro-zone is triggering buying of the Swiss franc, which is also considered to be a safe-haven currency like the yen and the dollar,” said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest bank. “How the Swiss National Bank will respond to today’s relatively sharp move remains to be seen.” Swiss Intervention Switzerland’s central bank said Dec. 10 it will soften its currency intervention policy and stop purchases of corporate bonds as it takes the first steps to withdraw emergency measures. The SNB said this month it will act to counter “any excessive” moves by the franc against the euro. The yen and dollar rose this week as investors retreated from higher-yielding assets. Ten-year Treasuries jumped yesterday by the most since October and the Standard & Poor’s 500 Index tumbled 1.2 percent. The MSCI Asia Pacific Index of regional shares dropped 0.6 percent today. In the past two weeks, ICE futures exchange’s Dollar Index rebounded 4 percent as signs of economic recovery prompted traders to speculate that U.S. policy makers would raise rates sooner than expected. Exporter Buying The gauge rose the most in two weeks yesterday, advancing as much as 1.2 percent to 77.94, the highest since Sept. 8. It was the biggest one-day gain since Dec. 4, when the Labor Department reported fewer-than-expected job losses. The yen rose against major counterparts on prospects Japan’s exporters are bringing home earnings. Large Japanese manufacturers expected the yen to average 91.16 per dollar in the six months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released Dec. 14. “When the dollar climbs toward 90 yen, many Japanese exporters sell the dollar to repatriate profits,” said Tomokazu Matsufuji, a dealer at SBI Liquidity Market Co. in Tokyo, a unit of financier SBI Holdings Inc. Bank of Japan Governor Masaaki Shirakawa and his colleagues held the benchmark overnight lending rate at 0.1 percent by a unanimous vote, the central bank said in a statement today. All 19 economists surveyed by Bloomberg News predicted the decision. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Yoshiaki Nohara in Tokyo at Ynohara1@bloomberg.net

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