By Linus Chua and Saeromi Shin Feb. 25 (Bloomberg) -- The euro fell to a one-year low against the yen and Asian stocks dropped after Moody’s Investors Service and Standard & Poor’s said they may downgrade Greece’s credit rating again. Oil and copper reversed earlier gains. The euro declined to 120.74 yen as of 2:20 p.m. in Tokyo from 122.03 yen yesterday, after earlier dropping to 120.62, the weakest level since Feb. 24, 2009. The MSCI Asia Pacific Index lost 0.9 percent to 116.69 and S&P 500 futures slid 0.7 percent. Moody’s and S&P’s warnings raise concerns that Greece’s fiscal woes may spread to other nations and extend losses in the euro, which has fallen 8.3 percent against the yen in the past two months. Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. economy is in a “nascent” recovery that still requires low interest rates. “The impact of the Greece issue should be felt even stronger if there are signs of bumps to the global recovery,” Kim Yong Tae, a Seoul-based fund manager at Yurie Asset Management, which manages $3 billion. “If another downgrade comes, I think that should affect markets in the short term and raise concern about other struggling countries in the region.” The euro dropped against 10 of its 16 major counterparts as S&P raised concerns yesterday the weak Greek economy and political opposition threaten the nation’s ability to reduce the European Union’s largest budget deficit. The euro fell to $1.3469 from $1.3538 in New York yesterday. It touched $1.3444 on Feb. 19, the lowest since May 18. Pierre Cailleteau, managing director of sovereign risk at Moody’s, gave a similar assessment in an interview in Tokyo today, and said it’s “pretty likely” Greece’s sovereign debt rating may be cut within months. Dollar Gains The dollar has risen 2.7 percent versus the euro this month, heading for a third monthly gain, its longest stretch since November 2008. Japan’s Nikkei 225 Stock Average dropped 0.9 percent, while Australia’s S&P/ASX 200 Index fell 0.8 percent. South Korea’s Kospi Index and Taiwan’s Taiex declined more than 1 percent. Goodman Fielder Ltd., Australia’s largest baker, slumped 4.5 percent after first-half earnings missed analyst estimates. Toll Holdings Ltd. shares tumbled 17 percent after the air- freight and logistics company reported lower profit. Denso Corp. dropped 3.4 percent in Tokyo trading after one of the autoparts maker’s units was inspected by the U.S. Federal Bureau of Investigation. The unit in America is cooperating with the investigation, said Bridgette Gollinger, a spokeswoman for the subsidiary. ‘Too Optimistic’ Asian stocks outside of Japan may fall 12 percent this year because valuations have become too expensive and as developed economies such as the U.S. recover at a faster pace, Royal Bank of Scotland Group Plc said. China, India and Indonesia are among “overpriced” and “over-owned” markets that may fall even further, Emil Wolter, Singapore-based head of Asian regional strategy at RBS, said in a Bloomberg Television interview today. They are also among markets that may face greater risks as governments exit their monetary and fiscal stimulus, he said. “Initially we started the year with an expectation of a modest 3 percent absolute return gain, but I think at this point that’s proven to be a little too optimistic,” Wolter said. Crude oil fell 0.5 percent to $79.57, dropping below $80 a barrel as the dollar rose against the euro. Copper for three-month delivery declined 0.4 percent to $7,124 a metric ton after erasing a gain of as much as 1.2 percent. Aluminum dropped 0.1 percent to $2,134.50 a ton. Zinc slid 0.6 percent to $2,191.25 a ton, reversing an increase of as much as 2.1 percent. The cost of protecting Asia-Pacific bonds from default pared earlier declines, according to traders of credit-default swaps. The Markit iTraxx Australia index rose 4 basis points to 98.5, after earlier falling 1 basis point, according to prices from National Australia Bank Ltd. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan fell 1 basis point to 116 basis points, trimming an earlier fall of 2 basis points, according to Citigroup Inc. To contact the reporters for this story: Linus Chua in at lchua@bloomberg.net; Saeromi Shin in Seoul at sshin15@bloomberg.net

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