The euro declined against the yen and dollar on speculation the slump in Eastern Europe will cause the regional economic slowdown to deepen. Kazakhstan devalued the tenge by 18 percent today, and Russia’s ruble approached an 11-year low versus the dollar after Fitch Ratings cut the nation’s debt rating. The euro fell toward an eight-week low against the dollar after a report showed retail sales declined more than economists forecast. “Eastern European currencies are melting down,” said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. “The cold wind from the east is also knocking down the euro. Emerging markets are still a sell.” The euro fell 0.7 percent to 115.81 yen at 10:18 a.m. in New York, from 116.63 yesterday. The 16-nation currency dropped 1 percent to $1.2911 from $1.3040, touching $1.2706 on Feb. 2, the lowest level since Dec. 5. The dollar was little changed at 89.46 yen, compared with 89.44. The dollar erased its loss against the yen as a report showed U.S. service industries contracted in January at a slower pace than forecast as the slump in orders cooled. The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 42.9 from 40.1 in December. Readings below 50 signal contraction. Norway’s krone gained 1.5 percent to 8.8625 per euro after Norges Bank lowered the nation’s target lending rate by a half- percentage point to 2.5 percent. Governor Svein Gjedrem said in a statement that borrowing costs have been cut “considerably.” Kazakhstan’s Devaluation Kazakhstan followed Russia, Ukraine and Belarus in devaluing its currency, abandoning intervention to preserve reserves as local banks and companies struggled to refinance debt. Kazakhstan’s tenge weakened to 149.67 per dollar from 123.48 yesterday after the central bank said in a statement that the currency will trade at about 150. The ruble fell as much as 1 percent to 36.3278 per dollar, near the lowest since the currency was redenominated in 1998, after Fitch cut Russia’s debit rating for the first time in more than a decade as falling oil prices contributed to dwindling foreign currency reserves and record capital flight. Fitch reduced the rating to BBB, the second-lowest investment grade, and maintained a negative outlook. The Polish zloty slumped as much as 1.4 percent to 4.6995 per euro, the weakest level since June 2004, on concern the economic slowdown is worsening and speculation the central bank won’t step into the market to support the currency. Economy Minister Waldemar Pawlak told public radio that trying to halt the zloty’s slide would be a mistake. European Retail The euro also dropped versus the yen and dollar as the European Union’s statistics office in Luxembourg said retail sales fell 1.6 percent in December from a year earlier. The median forecast of 13 economists surveyed by Bloomberg News was for a decrease of 1.4 percent. “If traders think that the euro-zone recession will be more prolonged, that’s ultimately bad news for the euro,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. The ECB will keep its main refinancing rate at 2 percent at a policy meeting tomorrow, according to the median forecast of 53 economists surveyed by Bloomberg. ECB President Jean-Claude Trichet reiterated last week that the next “important” meeting for policy makers will be in March. The euro’s decline against the dollar may be petering out, according to ABN Amro Holding NV and Citigroup Inc. ‘Lost Momentum’ The dollar’s gain over the past few weeks “appears to have lost momentum,” Greg Gibbs, director of foreign-exchange strategy at ABN Amro Australia Ltd. in Sydney, wrote in a note to clients. Citigroup analysts led by New York-based Todd Elmer said yesterday the euro is “close to a bottom.” The yen and dollar gained versus the euro on concern the U.S. fiscal stimulus plan will meet Senate resistance and widening credit losses will erode earnings, increasing the haven demand for the Japanese and U.S. currencies. In the first Senate vote yesterday on amending President Barack Obama’s $885 billion plan, Democrats fell two votes short of the 60 needed to proceed on a proposal to add $25 billion in spending on highways, mass-transit programs and water projects. The vote was 58-39 in favor of clearing the procedural hurdle. “Risk reduction has become a key theme,” said Michiyoshi Kato, a senior vice president of currency sales at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “Investors are buying the yen.”

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