Euro Weakens Amid Concern Region’s Debt Crisis Is Worsening

The euro fell from almost a one-week high against the dollar after a European report showed inflation slowed and Italy’s biggest bank said it needs to raise more capital, fueling bets the region’s debt crisis is worsening.

The 17-nation currency dropped toward an 11-year low against the yen after UniCredit SpA’s plan to sell shares spurred concern European banks will need to raise more capital. The euro slid versus most major peers after El Pais newspaper said the Spanish government helped the Valencia region make an overdue payment to Deutsche Bank AG. The pound climbed to a 15- month high versus the shared currency.

“The German auction wasn’t stellar, and you can trace the weaker euro to concerns in Spain that are starting to bubble to the surface again,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “There’s definitely a somewhat more defensive tone to the market today.”

The euro fell 1 percent to $1.2924 at 11:15 a.m. in New York after rising to $1.3077 yesterday, the highest level since Dec. 28. The common currency depreciated 1 percent to 99.16 yen. It dropped to 98.66 yen on Jan. 2, the weakest since December 2000. The dollar was little changed at 76.74 yen.

Europe’s shared currency slid 5.6 percent over the past six months, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as investors sought safer assets amid the region’s debt turmoil. The dollar gained 7.3 percent and the yen climbed 12 percent.