Euro weakens from almost two-month high amid ECB speculation

The euro weakened versus most of its major counterparts amid concern policy measures from the European Central Bank may not be enough to contain the region’s debt crisis.

The 17-nation currency declined from almost a two-month high against the dollar as ECB President Mario Draghi said the central bank would be willing to buy bonds of maturities as longs as three years. The U.S. currency gained as global stocks and commodities fell even after a report showed manufacturing in the U.S. contracted for a third month, adding to speculation the Federal Reserve will announce another round of monetary easing.

“It’s not a popular view that Draghi would go back on his commitments from the previous meeting, so most people are anticipating what he will say,” said Alan Ruskin, global head of Group-of-10 foreign-exchange strategy at Deutsche Bank AG in New York. “I now think the big event of the week is Friday, with U.S. payroll data pushing the Fed toward a decision.”

The euro fell 0.2 percent to $1.2572 at 3:16 p.m. New York time, after climbing to $1.2638 on Aug. 31, the strongest since July 2. The shared currency was little changed at 98.61 yen, after appreciating to 99.03 yen on Aug. 31, the strongest since Aug. 21. The yen fell 0.2 percent to 78.44 per dollar.

Euro Sale

“You sell the euro; there’s a lot already priced in and we pretty much know what the ECB is going to do,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York, said in an interview on Bloomberg Television’s “Lunch Money” with Sara Eisen. “They’re probably going to purchase bonds in the two-year area, conditional on Spain asking for help.”

The euro has dropped 4.1 percent this year, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen declined 2.9 percent, and the dollar weakened 0.8 percent.

The common currency faces “good resistance” in the $1.2684-to-$1.2692 range, Tom Fitzpatrick and Shyam Devani, technical strategists at Citigroup Global Markets, wrote today in a research note.

The Dollar Index rose 0.1 percent to 81.305 as the Institute for Supply Management’s factory index fell to 49.6 last month, the lowest since July 2009, from 49.8 in July, the Tempe, Arizona-based group said today.

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