By Lukanyo Mnyanda Dec. 9 (Bloomberg) -- The yen rose as a report showing Japan’s economy expanded more slowly than initially reported deepened concern that the pace of the global recovery is flagging, boosting demand for the currency as a refuge. The yen strengthened for a third day against the euro as the MSCI World Index of stocks slipped. The British pound weakened against the euro as Chancellor of the Exchequer Alistair Darling prepared to deliver his pre-budget report to parliament today. Investors sold higher-yielding currencies after Fitch Ratings cut Greece’s debt rating yesterday. “Risk aversion has been the main driver,” said Lutz Karpowitz, a currency strategist in Frankfurt at Commerzbank AG, Germany’s second-biggest lender. “I wouldn’t exclude the possibility of more bad news, which would be bad for the high- yielding currencies.” The yen appreciated to 129.81 per euro as of 7:06 a.m. in London, from 130.03 yesterday in New York, after earlier trading at 128.80, the strongest level since Nov. 27. It was at 87.96 per dollar, from 88.43. The euro bought $1.4754, from $1.4704, after earlier trading at the weakest level since Nov. 3. Japan’s gross domestic product rose at an annual 1.3 percent pace last quarter, the Cabinet Office said today in Tokyo. That’s slower than the 4.8 percent rate reported in preliminary figures last month and the 2.8 percent median estimate of economists surveyed by Bloomberg. Prime Minister Yukio Hatoyama unveiled a 7.2 trillion-yen ($81 billion) package to revive the economy yesterday. The Bank of Japan last week announced a 10 trillion-yen credit program. Stock Declines The Japanese currency climbed against 12 of the 16 most- active counterparts, strengthening the most against the South Korean won. European stocks fell. Sterling weakened to 90.32 pence per euro, from 90.27 yesterday, and was at $1.6331, from $1.6287. Moody’s Investors Service yesterday said its top debt ratings on the U.S. and the U.K. may “test the Aaa boundaries” because the country’s deficits are worsening. Darling’s report “is likely to be contentious for its lack of fiscal adjustment and could be of greater significance than usual,” Michael Hart, a London-based currency strategist at Citigroup Inc, wrote in a report today. “To the extent that it brings the poor state of the public finances into sharper focus, it may also put renewed downward pressure on the pound.” Dubai Concern Britain’s currency also fell on concern Dubai’s state- controlled companies will have to sell their assets in the U.K. to pay for loan obligations. The pound has lost 2.5 percent against the dollar since Nov. 25, when Dubai World said it was seeking a “standstill” agreement on its debt. The euro rebounded against the yen and rose versus the dollar amid gains in U.S. stock-index futures and confidence that there won’t be downgrades to other euro-area governments anytime soon. Fitch cut Greece’s credit rating one step to BBB+ yesterday, the third-lowest investment grade. Standard & Poor’s on Dec. 7 put Greece’s A- rating on watch for a possible downgrade. The European Commission is ready to help Greece tackle its budget deficit, the European Union’s Economic and Monetary Affairs Commissioner Joaquin Almunia said in a statement late yesterday. He didn’t say what form any assistance may take. “Stock futures are up and risk is seemingly back on again,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “People have digested the news and are now thinking these are good levels to pick up euros.” To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net.

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