* Greek fiscal woes hurt euro after SP comments
* Yen hits 3-week high vs dollar, 1-year high vs euro
* U.S. jobless claims rise unexpectedly in latest week (Adds details, comment, updates prices)
By Wanfeng Zhou
NEW YORK, Feb 25 (Reuters) - The dollar and euro fellagainst the yen on Thursday as worries about the Greek debtcrisis and an unexpected rise in U.S. initial jobless claimsboosted safe-haven flows into the Japanese currency.
The euro neared a nine-month low against the dollar and hita one-year low versus the yen as worries of a sovereign debtdefault in the euro zone grew after ratings agency Standard andPoor"s said late on Wednesday it may cut Greece"s rating one ortwo notches within a month. [ID:nLDE61N2KL]
Investors" appetite for risk fell further after U.S. datashowing first-time filings for unemployment benefitsunexpectedly rose in the latest week, fueling concern about thelabor market. See [ID:nN24129689]
"The yen has strengthened through Asian and Europeantrading. Sovereign risk fears and the threats of a downgrade ofGreece has definitely had an impact," said Sacha Tihanyi,currency strategist at Scotia Capital in Toronto.
"The initial jobless claims data has really helped to pushmore of a U.S.-centric feeling of risk aversion," he added."Once we saw that data come out around 8:30 a.m., dollar/yendropped quite rapidly."
In midday trading, the dollar dropped to a low of 88.81 yenJPY=, its weakest in about three weeks, according to Reutersdata. It was last at 88.83 yen, down 1.5 percent.
At current prices, the dollar"s decline versus the yen isthe biggest one-day drop since Feb. 4
Traders said the yen will likely remain in favor going intothe Japanese fiscal year-end. Japanese corporates traditionallyrepatriated overseas revenues back to their domestic currencyahead of the financial year close on March 31.
The euro fell as low as $1.3452, near a nine-month low of$1.3442 hit on Friday, according to Reuters data. It lasttraded at $1.3482, down 0.4 percent.
Among other ratings agencies, Moody"s Investors Servicetold Reuters on Thursday any changes in its ratings on Greecewould depend on whether Athens delivered on its fiscal reformplans. See [ID:nTOE61O07J]
Fitch Ratings expects to keep Greece"s BBB+ ratingunchanged for the next few months barring surprises and ismaintaining its negative outlook. See [ID:nLDE61O1EB]
HIGH-YIELDERS TUMBLE
Concerns over Greece and other peripheral euro zonecountries" ability to pay their debts have driven the euro downmore than 10 percent versus the dollar from its December highs.
Against the yen, the euro traded as low as 119.66 yenEURJPY=, the lowest since February, 2009, according toReuters data. It was last at 119.80 yen, down 1.8 percent.
EU inspectors visiting Athens have told authorities theysee a deeper than expected recession and higher borrowing costshindering Greece in meeting its deficit-cutting targets. See[ID:nLDE61O20P]
The spread between Greek and German 10-year governmentbonds widened, and the cost of insuring Greek debt againstdefault rose. The cost of insuring Spain and Portugal"s debtalso rose. [ID:nLDE61O127]
"In short, don"t expect the pressure to let up on the eurobefore we see further substantive declines from a valuationperspective," said Mark Frey, director of FX trading at CustomHouse in Victoria, British Columbia, a global payments dealer.
"The market is just now beginning to square its focus onSpain, Portugal and Ireland, where similar and no less diresituations are beginning to emerge," he wrote in a note.
Higher-yielding currencies such as the Australian and NewZealand dollars came under heavy pressure. The Australiandollar fell 1.4 percent to US$0.8806 AUD= and was down 2.7percent at 78.28 yen AUDJPY=R. The New Zealand dollar dropped1 percent to US$0.6858 NZD=.
Sterling GBP=D4 hit a nine-month low against the dollaron Thursday on weak UK data and concerns the Bank of Englandcould expand quantitative easing. See [ID:nLDE61O1Y5] (Editing by Andrew Hay)
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