By Yasuhiko Seki and Ron Harui Aug. 19 (Bloomberg) -- The euro dropped for a second day against the dollar as signs that Europe’s economic recovery is waning damped demand for the single currency. The euro fell versus most of its 16 major counterparts after Germany’s Der Spiegel magazine said social tensions are rising in Greece as austerity measures hurt the economy. The yen slid against the dollar on speculation Japan will weaken the currency and after data showed domestic investors bought a record amount of foreign debt last week. Malaysia’s ringgit rose to a 13-year high as the central bank relaxed currency controls. “The fundamentals of most of the euro zone haven’t really improved,” said Tsutomu Soma, a currency dealer in Tokyo at Okasan Securities Co. “The bias is for the euro to be sold.” The euro fell to $1.2810 as of 6:47 a.m. in Tokyo from $1.2853 yesterday in New York. It reached $1.2734 on Aug. 16, the weakest level since July 21. The yen slid to 85.75 per dollar from 85.49. The euro traded at 109.83 yen from 109.84 yen. Europe’s currency dropped toward a four-week low versus the greenback before a German report that economists said will show growth in producer prices slowed last month. The producer price index rose 0.1 percent in July after gaining 0.6 percent the previous month, according to a Bloomberg News survey. Austerity measures in Greece are dragging down the economy and have driven the unemployment rate to as high as 70 percent in some areas, Der Spiegel reported on its website. The International Monetary Fund projects Greek joblessness at 12 percent this year and 13 percent in 2011. Stop-Loss Orders The slide in the euro accelerated as Japanese margin traders had placed automatic orders to sell the currency if it declined to a certain level, said Takashi Kudo, general manager of market information service at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “A series of stop-loss orders were triggered after the euro failed to hold the $1.2850 mark,” Tokyo-based Kudo said. The yen weakened after Ministry of Finance data showed Japanese investors scooped up a net 2.17 trillion yen ($25.5 billion) in foreign bonds and notes, the most since the data began in 2001. The currency also lost ground on speculation authorities will act to temper further gains after the yen reached a 15-year high versus the dollar this month. The Bank of Japan may increase the amount of a corporate loan program to 30 trillion yen ($351 billion) from 20 trillion yen, the Sankei newspaper reported, without saying where it obtained the information. The BOJ may also extend the duration of the loan to six months from three months, Sankei said. ‘Wariness’ “Wariness that the Japanese government may invoke some policies are stoked each time the yen comes closer to the 85 level,” said Shinichi Hayashi, a dealer in Tokyo at Shinkin Central Bank, the central institution for Japan’s financial cooperatives. “This policy outlook may slow down the pace of appreciation.” Japan’s Finance Minister Yoshihiko Noda said today he will continue to monitor financial markets closely. A ruling-party lawmaker yesterday urged Prime Minister Naoto Kan to immediately take steps to weaken the yen to 95 per dollar as the currency’s rally hurts the export-led economy. “Intervention is necessary to show that the government cannot accept the current level,” Yoichi Kaneko, a Democratic Party of Japan upper-house lawmaker, said in an interview. Central banks intervene in the foreign-exchange market when they buy or sell currencies to influence exchange rates. Malaysian Ringgit The ringgit climbed for a third day after the central bank said yesterday local companies can use the currency to settle cross-border transactions with immediate effect. Exporters may also hedge their foreign-exchange risks beyond a previous 12- month threshold, Bank Negara Malaysia said in a statement. “Given that Malaysia is running a large trade surplus, the new regulations will allow exporters to sell their dollar proceeds in the forwards market at a faster pace and possibly in a bigger volume,” said Dariusz Kowalczyk, a currency strategist in Hong Kong at Credit Agricole. “This in turn will put appreciation pressure on the ringgit.” The ringgit advanced to 3.1305 per dollar from 3.1405 yesterday. To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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