The euro fell against the yen as a report showed Europe’s jobless rate climbed in February to the highest level in almost three years, adding to evidence the region’s recession is worsening. Europe’s currency also slid to the lowest level in two weeks against the pound as German retail sales unexpectedly dropped in February and Europe’s manufacturing contracted last month more than previously estimated. “We’ll continue to see the euro’s outlook being predicated toward lower levels,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “Ongoing signs of the euro area’s fragility will keep the market pinned down.” The euro dropped 0.2 percent to 130.86 yen at 8:21 a.m. in New York, from 131.13 yesterday. The euro was at $1.3267, compared with $1.3250, after touching $1.3114 on March 30, the lowest level since March 18. The currency may trade in a range of $1.31 to $1.33 today, Stretch said. The euro fell 0.6 percent to 92.05 pence after touching 91.55, the lowest level since March 16. The yen was at 98.68 per dollar, compared with 98.96. The euro region’s jobless rate increased in February to 8.5 percent, the highest level since May 2006, the European Union’s statistics office said in Luxembourg today. The median forecast of 23 economists surveyed by Bloomberg was 8.3 percent. German retail sales, adjusted for inflation and seasonal swings, decreased 0.2 percent in February, the Federal Statistics Office in Wiesbaden said. The median forecast of economists in a separate survey was an increase of 0.3 percent. An index of European manufacturing based on a survey of purchasing managers by Markit Economics was 33.9 in March, below the initial estimate of 34. A reading below 50 indicates contraction. ECB Outlook The European Central Bank will lower the main refinancing rate by a half-percentage point to 1 percent tomorrow, according to the median forecast of 55 economists surveyed by Bloomberg. ECB council member Axel Weber said in March that the central bank shouldn’t cut borrowing costs below that level. The yen earlier fell to the lowest level in almost four weeks against the dollar after the Bank of Japan’s Tankan survey of sentiment among large manufacturers slumped to minus 58 in March from minus 24 in December. The median forecast of economists surveyed by Bloomberg was a reading of minus 55. “Japan seems to be taking the hit in terms of their economy a lot worse than other countries,” said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd., a unit of the world’s largest interdealer broker. The Tankan survey “absolutely highlights the reason why we should be getting out of the yen.” Yen’s Quarterly Drop The yen tumbled 8.4 percent against the dollar in the first quarter, the worst performance since the last three months of 2001, and weakened 3.4 percent versus the euro, the first quarterly drop since June. The Dollar Index extended gains into a fifth quarter on speculation U.S. reports today will show the recession in the world’s largest economy is easing, restoring investor confidence in the nation’s assets. Contracts to buy previously owned homes in the U.S. were unchanged in February after a 7.7 percent drop in the previous month, according to the median forecast of 37 economists surveyed by Bloomberg News. A report from the National Association of Realtors is due at 10 a.m. New York time. The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, gained 0.1 percent to 85.52. The gauge yesterday completed a fourth consecutive quarterly gain, the longest stretch of advances since 2005.

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