Nov. 16 (Bloomberg) -- The yen, dollar and Swiss franc strengthened this week against currencies from nations that offer higher returns as credit-market losses deepened.

Norwegian, Canadian and Australian currencies fell the most as investors pared investments funded by loans in Japan and Switzerland. The U.S. dollar gained for the first week in six against the euro as traders sought haven in U.S. government debt.

``Risk aversion pushed people away from higher yielders,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research, part of MF Global Ltd., the world's largest broker of exchange-traded futures and options contacts. ``No one has a handle on how deep the subprime and credit problem is. People may be reluctant to dive into risky assets.''

The dollar gained 0.2 percent this week to $1.4648 per euro at 4 p.m. in New York, rebounding from a record low of $1.4752 on Nov. 9. The U.S. currency lost 0.3 percent today after a government report showed industrial production in the U.S. unexpectedly dropped 0.5 percent last month.

The yen and the dollar declined today versus the euro. Japan's currency fell 0.6 percent today to 110.93 per dollar and lost 0.8 percent to 162.51 per euro.

Norway's Krone

Norway's krone was the biggest loser this week among major currencies, weakening 3.2 percent against the dollar and 2.9 percent versus the yen. Canada's dollar declined 3 percent against the U.S. currency. The Australian currency fell 2.1 percent against the dollar.

The Swiss franc gained for a fifth week, rising 0.3 percent against the dollar and touching 1.1161, the highest since 1995. The franc also increased 0.5 percent versus the euro this week.

The pound fell 1.6 percent against the euro and reached the weakest since 2003 as speculation increased the Bank of England may need to cut interest rates from 5.75 percent as early as next month.

The yen and franc are used by investors to finance investments in markets with higher returns because interest rates in those countries are among the lowest in the industrialized world. Japan's benchmark rate is 0.5 percent and Switzerland's is 2.75 percent. When risk aversion returned, investors bought the low-yielding yen and franc to pay back their loans, boosting demand for the currencies.

The cost of borrowing dollars for three months rose 0.04 percentage point, the most in 2 1/2 months, to 4.95 percent today on concern bank losses linked to U.S. subprime mortgages will grow, pushing banks to hoard cash.

Reversed Bets

Futures traders reversed their bets against the yen for the first time since September, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop, so-called net longs, was 20,796 on Nov. 13, compared with net shorts of 8,897 a week earlier.

Foreign investor demand for U.S. stocks and bonds rebounded in September after the Federal Reserve on Sept. 18 lowered its benchmark interest rate to combat a surge in mortgage defaults. Total holdings of equities, notes and bonds rose a net $26.4 billion after sales of a revised $70.6 billion in August, the Treasury Department said today in Washington.

Fed Governor Randall Kroszner today said policy makers probably won't need to further lower borrowing costs from 4.5 percent to help the economy weather a ``rough patch'' in the coming year. The world's largest securities firms and banks have announced more than $50 billion of writedowns related to losses on subprime mortgages.

Dollar Drops

The U.S. currency has dropped about 11 percent so far this year, based on the Fed's U.S. Trade-Weighted Major Currency Index. It fell this month to its weakest against the euro since the European currency's debut in 1999, the lowest against Canada's dollar since it was floated in 1950 and to a 26-year low versus the pound.

A falling dollar has pushed foreign central banks away from U.S. assets. Nigeria has changed the law to allow it to diversify its foreign reserves out of dollars, Finance Minister Shamsudeen Usman said today. Nigeria is joining countries in the Middle East and Asia such as the United Arab Emirates and China that are reviewing their foreign exchange reserves.

United Arab Emirates

The United Arab Emirates would only drop its currency peg to the dollar with the backing of the Gulf Cooperation Council, Sultan Bin Nasser al-Suwaidi, the country's central bank governor, said today. Al-Suwaidi said yesterday that the falling dollar will trigger a review of the dirham's 30-year-old peg and his country was considering linking the dirham to a basket of currencies.

Saudi Arabia, the world's largest crude oil exporter, won't discuss pricing oil in currencies other than the U.S. dollar as Venezuela and Iran push for such talks at an OPEC summit in Riyadh. Saudi Arabia doesn't want to see the U.S. dollar collapse, Saudi Foreign Minister Prince Saud Al-Faisal said, speaking at a meeting of oil and finance ministers today.

``They are sticking to their guns for the time being,'' said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``They don't want to talk down the dollar at this point'' because it may hasten the currency's decline and put more pressure on the local currency and inflation.

European, Canadian and Japanese officials have criticized volatility in exchange rates and urged China to allow a faster pace of appreciation in the yuan to share in the burden of a weakening dollar. The Chinese yuan has fallen 0.2 percent against the dollar this week, trading at 7.4239 per dollar.

Paulson's Tour

U.S. Treasury Secretary Henry Paulson, who is on a six-day tour of Africa, said yesterday he expected to discuss exchange rates at the Nov. 17-18 meeting of the G-20, which includes the largest developed nations and emerging markets such as China and India.

``The long-term strength of the U.S. economy will be reflected in the currency,'' Paulson said in an interview with Johannesburg's 702 Radio today. Paulson has repeated the ``strong dollar'' policy over the past two weeks.

``What we need is to have Asia adjust its currencies at a faster pace,'' said Hans-Guenter Redeker, global head of currency strategy at BNP Paribas SA. ``If the Middle East de- pegs without Asia taking away pressure from the sterling and euro, you would have a tremendous overshoot of cable and euro.''

Europe's single currency will trade at $1.45 by year-end, according to the median forecast of 45 analysts and brokerages surveyed by Bloomberg News.

To contact the reporter on this story: Min Zeng in New York at mzeng2@bloomberg.net.

Last Updated: November 16, 2007 16:01 EST