Euro drops to 1-week low versus dollar as German data weaken

The euro declined to a one-week low against the dollar after a gauge of German business confidence unexpectedly dropped in September, adding to concern the debt crisis is hindering the region’s economy.

The 17-nation currency fell for a fifth day versus the yen after German Chancellor Angela Merkel and French President Francois Hollande clashed during the weekend on a timetable to introduce joint oversight of euro-area banks. The Ifo institute in Munich said its business climate index dropped for a fifth straight month. The Australian dollar weakened on speculation growth in China, its biggest trading partner, is worsening.

“The Ifo data cast doubt on Germany,” Dan Dorrow, head of research in Stamford, Connecticut at Faros Trading LLC, said in a telephone interview. “If you don’t have the pillar of growth there, it doesn’t bode well for building momentum in the euro.”

The euro dropped 0.6 percent to $1.2904 at 10:12 a.m. New York time, reaching the lowest level since Sept. 13. The shared currency fell 0.9 percent to 100.60 yen, extending its daily losing streak to the longest since the period ended July 24. The yen rose 0.3 percent to 77.97 per dollar.

The euro will weaken to $1.19 by year-end, said Raghav Subbarao, a foreign-exchange strategist at Barclays Plc in London. The common currency will decline to $1.27 by Dec. 31, according to the median estimate of analyst forecasts compiled by Bloomberg.

’Lost Momentum’

“The euro has lost momentum following its initial surge higher and looks constrained on any move above $1.30,” Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole CIB in Hong Kong, wrote in a note to clients. “Any upside in euro-dollar will be limited to resistance around $1.3180,” he said, referring to an area where sell orders may be clustered.

The yen strengthened versus all its major counterparts as Asian and European stocks slid, boosting demand for safer assets. The MSCI Asia Pacific Index of shares dropped 0.4 percent and the Stoxx Europe 600 Index slid 0.7 percent.

Japan’s currency tends to strengthen during periods of financial turmoil because the country’s current-account surplus means it isn’t reliant on foreign capital.

The yen has gained 6.1 percent in the past six months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro fell 3.3 percent, and the dollar dropped 0.3 percent.

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