By Oliver Biggadike and Bo Nielsen Aug. 14 (Bloomberg) -- The euro fell against the dollar and yen as a report showed European consumer prices declined, adding to concern the 16-nation region will lag in a recovery of the global economy. The euro headed for a weekly drop versus the yen as the price report added to concern companies will have to do more to encourage Europe’s consumers to spend. U.S. consumer prices held steady last month, while consumer confidence declined this month, reports showed. The difference between Germany’s two- and 10-year yields, a measure of growth and inflation expectations, narrowed for the first time in a week. “I wouldn’t be a buyer of the euro at these levels,” said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London, said before the reports. “This rally has fully embraced all of the good news out there and now risks of deflation are crystallizing.” The euro fell 1.4 percent to 134.63 yen as of 10:24 a.m. in New York, from 136.46 yesterday. It weakened 0.4 percent to $1.4233, from $1.4292. The yen appreciated 1 percent to 94.58 per dollar, from 95.48. The euro may fall to $1.40 before October, Mellor said. Prices in the euro region slid 0.7 percent from a year earlier, the European Union statistics office in Luxembourg said today. It was a bigger drop than the median estimate for a 0.6 percent decline in a Bloomberg survey of 24 economists. ‘Very, Very Distant’ The U.S. consumer price index was unchanged last month after gaining 0.7 percent in June, meeting economist predictions, a Labor Department report showed. The benchmark fell 2.1 percent from a year earlier. “The threat of inflation remains a very, very distant one,” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York. “Consumers still face substantial headwinds.” Germany’s 10-year yield fell 11 basis points, or 0.11 percentage point, to 3.32 percent, narrowing the difference versus two-year securities by three basis points to 203 basis points. The comparable spread in U.S. contracted three basis points to 248 basis points. To contact the reporters on this story: Oliver Biggadike in New York at obiggadike@bloomberg.net; Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

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