The U.S. dollar and the Japanese yen are extending their rally against other major currencies in Asian trading on Friday as risk aversion aggravated after Fitch lowered Greece's credit rating and Moody's Investors Service downgraded 16 Spanish banks.

The U.S. dollar, Japanese yen and Swiss franc are considered as safe haven currencies as these nations have lower lending rates. These currencies tend to gain in times of financial turmoil and vice-versa.

International ratings agency Fitch on Thursday downgraded Greece's long term credit rating to CCC from B-, citing heightened risk that the nation may not be able to sustain its membership of Economic and Monetary Union.

Fitch has also downgraded the Short-term foreign currency rating to 'C' from 'B'. At the same time, the agency has revised the Country Ceiling to 'B-'.

Meanwhile, Moody's Investors Service downgraded the long-term debt and deposit ratings for 16 Spanish banks including Banco Santander, the euro zone's largest bank, citing economic weakness and the government's reduced ability to support troubled lenders.

Moody's said in a statement that the main drivers for the Spanish bank downgrades were a surge in soured loans, the recession, restricted funding access and the reduced ability of the government to support lenders as its own creditworthiness diminishes.

The agency said the debt and deposit ratings declined by one notch for five banks, by two notches for three banks and by three notches for nine banks. The short-term ratings for 13 banks have also been downgraded between one and two notches, triggered by the long-term ratings changes.

The yen climbed to a fresh 3-month high of 100.25 against the euro with 100.0 seen as the next upside target level. At yesterday's close, the euro-yen pair was quoted at 100.67.

The yen's rise adds pressure on Japanese authorities to take measures to halt its gains. Japanese Finance Minister Jun Azumi said today that authorities are cautiously monitoring the movement of yen.

At a regular press conference, he said excessive reaction of speculators led to a rapid yen appreciation on Thursday. The government is prepared to take timely and appropriate action, Azumi said.

Further, Azumi said that excessive currency moves are undesirable.

The yen also rose to fresh 3-month highs of 124.69 against the pound and 83.48 against the franc, compared to yesterday's close of 125.30 and 83.83, respectively. The next upside target level for the yen is seen at 82.0 against the franc and 124.0 against the pound.

Against the Canadian dollar, the yen strengthened to 77.50, its highest level since February 14. If the yen gains further, it may likely target the 77.0. The loonie-yen pair was quoted at 77.80.

The yen jumped to a fresh 5-month high of 77.63 against the Australian dollar and a 4- 1/2 -month high of 59.84 against the New Zealand dollar. The next upside target level for the Japanese currency is seen at 77.0 against the aussie and 59.0 against the kiwi. The aussie-yen and the kiwi-yen pairs were worth 78.44 and 60.56, respectively at yesterday's close.

But the yen gained slightly against the U.S. dollar, with the pair now trading at 79.27, compared to yen's fresh 3-month high of 79.15 hit yesterday. The dollar-yen pair ended Thursday's trading at 79.31.

Elsewhere, the U.S. dollar also edged up, hitting fresh multi-month highs of 1.5735 against the pound, 1.2656 against the euro and 0.9493 against the franc, compared to yesterday's close of 1.5800, 1.2694 and 0.9464, respectively. If the dollar climbs further, it may target 1.570 against the pound, 0.95 against the franc and 1.263 against the euro.

The U.S. dollar that ended yesterday's trading at 1.0198 against the Canadian dollar surged up to a fresh 4-month high of 1.0229. On the upside, 1.030 is seen as the next target level for the greenback.

Against the Australian dollar, the US dollar jumped to a 6-month high of 0.9798, compared to 0.9891 hit late New York Thursday. The next upside target level for the greenback is seen at 0.970.

The U.S. dollar spiked up to a fresh 5-month high of 0.7550 against the New Zealand dollar and if the greenback advances further, it may likely target the 0.750 level. At yesterday's close, the pair was quoted at 0.7636.

There are no major economic reports due from Europe in the coming hours.

Canada's CPI for April is expected at 8:30 am ET.

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