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Yen Falls Vs. Dollar as Moody's Warns on Japan Government

The euro gains after data show U.S. service sector is contracting.

The yen fell against the dollar Thursday after Moody's warned it might cut Japan's credit rating because of government-debt concerns. The yen fell to 121.14 yen per dollar, from 120.67 yesterday.

The Moody's report said deflation was making it harder for the government to pay off its debts.

The yen was also being sold ahead of a report to due out on Friday that is expected to show that Japan's economy shrank in its April to June quarter.

The dollar was weaker against the euro as an industry survey showed the U.S. services sector shrank last month. The greenback fell to $0.8889 per euro, from $0.8865 yesterday. The currency derived some strength on a report showing initial jobless claims fell last week.

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The dollar was stronger against the Canadian dollar and the British pound, but weaker against the Australian dollar.