The euro fell by the most in more than two weeks against the dollar amid concern the region’s lingering debt crisis will hamper efforts by governments and banks to raise funds. The common currency weakened versus all but one of its 16 major counterparts before France auctions 8.5 billion euros ($11.3 billion) of debt today. The yen rose versus the euro after a Chinese report showed manufacturing expanded at a slower-than-forecast pace in December, supporting demand for safer assets. Taiwan’s dollar approached a 13-year high before a report this week that economists predict will show inflation accelerated. “We expect there will be some downward bias for the euro during this week and even more next week,” said Roberto Mialich, a senior currency strategist at UniCredit SpA in Milan. “We will be very surprised if the euro manages to hold the gains we saw at the end of 2010. There is a heavy calendar of debt auctions in the coming weeks so this is a potential drag for the euro.” The euro slid 0.8 percent to $1.3277 as of 8:22 a.m. in London from $1.3384 on Dec. 31, when it touched $1.3425, the highest level since Dec. 14. The shared currency is poised for its sharpest daily decline since Dec. 15 after gaining almost 10 percent in the second half of 2010. The yen climbed 0.5 percent to 108 per euro from 108.47. The dollar gained 0.3 percent to 81.34 yen. Canada’s currency rose to 99.33 Canadian cents per U.S. dollar from 99.80 cents, after advancing to 99.15 cents, the strongest since May 2008. Financial markets in the U.K., Australia, New Zealand and Japan are closed today for a public holiday. Europe’s Debt Crisis The euro had its largest loss versus the dollar in five years in 2010 as concern about the European debt crisis spurred demand for safer assets. The trading bloc added Estonia as its 17th member nation on Jan. 1. France will sell 84-day, 161-day and 343-day bills today. “The euro is the one currency we see falling against the dollar in the first quarter,” said Robert Ryan, a currency strategist at BNP Paribas SA in Singapore. “It’s the inability of the European institutions to get ahead of the curve. The real efforts to address the crisis have only come on the eve of utter collapse.” The likelihood the euro area will exist in its current structure in a decade is 20 percent as governments fail to take sufficient measures to tackle economic imbalances, the Centre for Economics and Business Research said last week. China’s Manufacturing The euro region will have another debt crisis by this spring, when Spain and Italy have to refinance more than 400 billion euros of bonds, CEBR Chief Executive Officer Douglas McWilliams said in an e-mailed note on Dec. 31. “The euro might break up at this point, though European politicians are normally able to respond to a crisis,” he said. “If the euro doesn’t break up, this could be the year when it weakens substantially toward parity with the dollar.” The median prediction of 37 analysts surveyed by Bloomberg News is for the euro to decline to $1.30 by the end of this quarter. The yen gained for the first time in three days versus the euro after China’s logistics federation and statistics bureau said on Jan. 1 its purchasing managers’ index fell to 53.9 in December from 55.2 in November. A separate Dec. 30 report from HSBC Holdings Plc and Markit Economics showed a purchasing managers’ index for China declined to 54.4 in December from 55.3 in November. Taiwan’s Dollar “A slowing Chinese economy would be a worry for Asia overall,” said Norifumi Yoshida, vice president of the trading section in Singapore at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest banking group. “The PMI data seem to be causing some risk aversion. The bias would probably be for the dollar and the yen to be bought.” Taiwan’s dollar extended last year’s 5.2 percent advance, the most since 2004. The island’s consumer prices climbed 1.7 percent in December, the most in 10 months, according to economists surveyed by Bloomberg before the Jan. 5 report. Central bank policy makers in Taiwan boosted the discount rate on 10-day loans by 12.5 basis points to 1.625 percent on Dec. 30, the third increase of 2010. “Higher inflation will continue to add pressure on the central bank to raise rates,” said George Pu, a fixed-income trader at President Securities Corp. in Taipei. The Taiwan dollar “will stay strong in the coming quarter.” Taiwan’s dollar rose 0.6 percent to NT$30.200 against its U.S. counterpart, after nearing a 13-year high trading at NT$29.098. It touched NT$29.084 on Dec. 30, the strongest since October 1997. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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