The yen gained versus most of its major counterparts as Egyptian political turmoil spurred demand for the currency’s safety even after Standard & Poor’s lowered Japan’s credit rating. The Swiss franc rose this week the most versus the euro since November as President Hosni Mubarak faced the biggest challenge to his 30-year rule. Egypt’s pound fell to a six-year low versus the dollar as Fitch Ratings revised the nation’s outlook to negative. The dollar erased its loss against the euro before next week’s U.S. payrolls report, forecast to show gains. “I don’t think when we said the fallout from the downgrade would be temporary we were thinking it would be six hours,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc. “We have risk aversion that is affecting the market, and it is dragging down global yields. The yen always gains when global yields go lower.” The yen appreciated 0.6 percent to 111.77 per euro yesterday, from 112.48 at the end of last week. On Jan 27, the day Japan was downgraded, the yen touched 114.01, the weakest level in two months. The yen advanced 0.5 percent to 82.12 versus the dollar, from 82.57. The dollar was little changed at $1.3611 per euro, from $1.3621. Crude oil for March delivery rose 0.3 percent to $89.31 a barrel on the Mideast turmoil, extending its gain over the past year to 21 percent. Treasury 10-year note yields dropped 0.07 percentage point to 3.32 percent. The Standard & Poor’s 500 Index slid 0.6 percent. Gold futures for April delivery rose from a four-month low, trading at $1.341.70 an ounce. Tear Gas Egyptian police fired tear gas yesterday as thousands of demonstrators pushed into Cairo’s Tahrir Square and trucks carrying riot police were pelted with rocks. Authorities restricted Internet and mobile-phone access and detained senior leaders of the Muslim Brotherhood, the main opposition group. The Swiss franc climbed 1.8 percent to 1.2821 versus the euro, from 1.3055, in its biggest weekly rally since it advanced 2.2 percent during the five days ended Nov. 26. The franc appreciated 1.7 percent to 94.19 centimes versus the dollar. “Whether you look at euro-yen or euro-swiss you’re going to get the same reaction,” said Paresh Upadhyaya, head of Americas G-10 currency strategy at Bank of America Corp. in New York. “It’s a classic risk-off move at the end of the week.” Among Mideast currencies, Israel’s shekel was the biggest loser versus the dollar, tumbling 2 percent to 3.6979. Egypt’s pound slid 0.9 percent to 5.8575 after touching 5.8584, the weakest level since January 2005. Turkey’s lira depreciated 2.7 percent to 1.6148. Japan’s Credit Rating The yen dropped to a two-month low against the euro on Jan. 27, when Japan’s credit rating was lowered to AA-. Persistent deflation and political gridlock undermined efforts to reduce a 943 trillion yen ($11 trillion) debt burden, S&P said. It was first time the ratings company downgraded Japan in nine years. Sterling had its biggest weekly drop in more than a month, declining 0.9 percent to $1.5860 after a report showed the U.K.’s gross domestic product unexpectedly shrank 0.5 percent in the three months through December after increasing 0.7 percent in the previous quarter. Morgan Stanley advised selling the pound against the dollar, saying the contraction of the economy and Bank of England Governor Mervyn King’s reluctance to raise interest rates will weigh on sterling. The drop in GDP and King’s view are “game changers that make us believe the pound will underperform in coming weeks,” currency strategists Tim Davis in London and Yilin Nie in New York wrote in a report. Dollar Index IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against currencies including the euro, yen and pound, declined 0.1 percent to 78.133, extending its drop in January to 1.1 percent. The Federal Reserve maintained its plan to buy $600 billion in Treasuries through June to support the economy, saying in its statement on Jan. 26 that inflation is too low and unemployment is too high to be consistent in the long run with policy makers’ congressional mandates for stable prices and full employment. U.S. employers added 140,000 jobs in January after an increase of 103,000 positions in the previous month, according to the median forecast of 58 economists in a Bloomberg News survey. The Labor Department’s report on Feb. 4 may show that the unemployment rate rose to 9.5 percent. The New Zealand dollar touched the highest level this year against the dollar as Reserve Bank Governor Alan Bollard said there will a “big increase” in economic output as earthquake rebuilding accelerates. The kiwi gained 1.9 percent to 77.36 U.S. cents after touching 77.94 yesterday, the highest level since Dec. 31. South Africa’s rand was the biggest loser versus the dollar as gold tumbled before rallying on Egyptian turmoil. The rand depreciated 1.8 percent to 7.1800. To contact the reporter on this story: Allison Bennett in New York at abennett23@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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