The Euro Drops the Most in Two Months

“The euro dropped the most in two months against the dollar as an index of services and manufacturing in the region shrank to a three-year low.

The 17-nation currency declined for a third day versus the yen as the data added to evidence the debt crisis is sapping growth in the euro area. The yen and the dollar strengthened against most of their major counterparts after separate reports showed China’s manufacturing and Japanese exports declined, spurring demand for assets perceived as safer. Australia’s dollar and South Africa’s rand led losses among higher-yielding currencies.

“One of the big problems that remains unresolved in the euro area is a lack of growth,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.”

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