The euro fell to a one-month low against the dollar and weakened against the yen on concern the European economy will deteriorate as central bank officials disagree on the measures needed to combat the recession. The yen rose versus all of the 16 most-active currencies as speculation the global slump will deepen spurred investors to cut holdings of higher-yielding assets. The Dollar Index approached the highest level in three weeks on prospects a U.S. report today will show a gauge of the economy’s outlook improved. The South Korean won was the biggest decliner against the greenback as importers may be taking advantage of six weeks of gains to pay their bills. “Investors fear that European policy makers aren’t doing enough to safeguard the economy,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Any sign that the euro zone economy is deteriorating will likely add to the downward pressure on the euro.” The euro dropped to $1.3007 as of 1:26 p.m. in Tokyo from $1.3044 in New York on April 17. It earlier declined to $1.2967, the lowest level since March 17. Europe’s currency fell to 128.55 yen from 129.33 yen, after touching 128.17, the weakest since March 30. The yen climbed to 98.82 per dollar from 99.16 last week. It advanced to 56.02 versus the New Zealand dollar from 56.32, and rose to 71.02 versus the Australian currency from 71.64. The won declined 0.7 percent to 1,341.35 per dollar. Worsening Economy The euro weakened against 13 of the 16 most-active currencies this month on signs the recession in the 16-nation region is deepening. Germany’s ZEW Center for European Economic Research in Mannheim may say tomorrow its gauge of current conditions fell to minus 90 in April, the lowest since September 2003, from 89.4 in March, according to a Bloomberg News survey. ECB governing council member Miguel Angel Fernandez Ordonez will speak in Madrid tomorrow, and vice-president Lucas Papademos will speak in Strasbourg, France on the same day. “There are cleavages on the unwieldy decision-making ECB governing council,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney. “The market sees the apparent disunity as a reason to sell the euro.” ECB council member Axel Weber said last week the bank shouldn’t lower its 1.25 percent benchmark rate below 1 percent, putting him in conflict with policy makers who say borrowing costs can drop below that level. Council members George Provopoulos from Greece and Athanasios Orphanides of Cyprus have indicated they may support cutting the target rate below 1 percent and buying debt to pump money into the economy, a policy known as quantitative easing. The ECB will lower its benchmark rate by a quarter- percentage point at its next meeting on May 7, according to a Bloomberg News survey of economists. Yen Gains The yen rose for a third day against the euro as concern the global recession will worsen helped push down Asian shares and U.S. stock futures. “Worries that Europe’s response to its recession is lagging behind other countries is causing risk aversion,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The yen is being bought and may strengthen” to 127.55 per euro and 98.51 against the dollar today, he said. Japan’s Nikkei 225 Stock Average fell 0.7 percent and the Standard & Poor’s 500 Index futures dropped 0.8 percent. Dollar Index The Dollar Index climbed for a fifth day, its longest run of gains since January, before the Conference Board releases its index of leading U.S. economic indicators today. The gauge fell 0.2 percent in March, after dropping 0.4 percent in February, according to a Bloomberg survey of economists. President Barack Obama said yesterday he will demand “accountability” from any U.S. banks that require additional taxpayer money following “stress tests” being conducted by regulators. The tests are being used to determine whether the companies have enough capital to cover losses over the next two years should the economic recession worsen. “The policies being taken by the Obama administration are fast and comprehensive and there are signs the recession there is waning,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This is positive for the dollar.” The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, rose to 86.083 from 85.981. Lower Volatility Gains in the yen may be tempered after the JPMorgan Chase & Co. benchmark index of investor expectations for currency swings dropped to a six-month low of 14.4 percent on April 17. Lower currency volatility indicates smaller exchange-rate fluctuations that can erode profit on so-called carry trades. This strategy involves borrowing funds in countries with lower interest costs, such as Japan, and investing them in nations with higher rates, allowing investors to pocket the difference. “Big currency moves are behind us,” said Maxime Tessier, chief of foreign exchange at Montreal-based Caisse de Depot et Placement du Quebec, Canada’s biggest pension fund manager, with C$120 billion ($98.6 billion) in assets. “The volatility spike has to unwind itself over time. Selling volatility has been the winning trade so far this year and will continue to work well.” The benchmark interest rate is 0.1 percent in Japan and as low as zero in the U.S., compared with 3 percent in Australia and in New Zealand. The Korean won fell against the dollar and the yen as importers took advantage of its recent gains to convert funds into dollars. The currency rose 5.3 percent in the past month as overseas investors increased bets on emerging-market assets amid signs the global recession is easing. “There are not a small amount of import deals coming in,” said Roh Sang Chil, a currency dealer at Kookmin Bank in Seoul. “But the won is supported as foreigners remained net buyers of stocks, supplying the market with foreign exchange.”

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