Euro Weakens Amid Speculation ECB Will Buy More European Government Debt

The euro fell to a five-week low versus the yen amid concern the European Central Bank will have to buy more debt from European governments as confidence wanes in the region’s ability to deal with its sovereign-debt crisis.

The 17-nation currency slid for a third day against the dollar as Spain planned to auction up to 4 billion euros ($5.4 billion) of bonds tomorrow, the same day France will sell as much as 8.2 billion euros of debt. The extra yield investors demand to hold euro-area bonds instead of German bunds was at almost euro-era highs. Italy’s largest bank, UniCredit SpA, prepared to ask the ECB to broaden the collateral it accepts.

“The market is very much on tenterhooks about the European auctions,” said Boris Schlossberg, director of research at the online currency trader GFT Forex in New York. “If the French debt comes out and goes badly, that will really send a signal that contagion has spread to and infected the core.”

The euro declined 0.3 percent to 104.04 yen at 12:31 p.m. New York time. It touched 103.41 yen, the weakest level since Oct. 10. The shared currency fell 0.3 percent to $1.3504, after dropping earlier to $1.3429, also the least since Oct. 10. Japan’s currency was little changed at 77.03 versus the dollar.

The euro’s decline will find support levels, or areas on a chart where buy orders may be clustered, at $1.3404 and $1.3382, according to MacNeil Curry, head of foreign-exchange and interest-rates technical strategy at Bank America Corp. in New York. A break above $1.3557 is needed to indicate stabilization, Curry wrote to clients today.

The shared currency slid 1.4 percent over the past six months versus nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 7.3 percent and the dollar rose 3.5 percent, the best performers.