The euro weakened from a five-month high against the dollar as speculation European banks will need more funds curbed demand for assets in the 16-nation region. Europe’s currency fell versus its 15 major counterparts ahead of this week’s disclosure of Ireland’s costs to bail out Anglo Irish Bank Corp. The euro slipped from an eight-week high versus the yen as Der Spiegel reported the European Commission lacks confidence in the viability of German regional lenders. China’s yuan climbed to the strongest level since 1993 on speculation the country will allow faster appreciation. “There’s an immense amount of potential bad news for the euro,” said Simon Derrick, chief currency strategist for Bank of New York Mellon Corp. “I’m concerned because the structural issues aren’t going to go away anytime soon.” The euro dropped to $1.3442 at 10:20 a.m. in London from $1.3492 in New York last week, when it touched $1.3495, the highest since April 20. The currency traded at 113.19 yen from 113.62 yen, after rising to 113.51 yen, the strongest level since Aug. 3. The dollar was at 84.20 yen from 84.21 yen. Irish Finance Minister Brian Lenihan, who said Sept. 22 that costs to bail out Anglo Irish will be “manageable,” is scheduled to publish the latest estimates by Oct. 1. While the state has pledged 22 billion euros ($29.6 billion), Standard & Poor’s says the final bill may be 35 billion euros, equal to 20 percent of Ireland’s gross domestic product. ‘Needs Absolute Clarity’ “The market needs absolute clarity,” said Cathal O’Leary, head of fixed-income sales at NCB Stockbrokers in Dublin. “Investors need to see a number for Anglo and they need to be convinced that it’s the final, final number.” The European Union is checking whether the financial help received by German regional lenders BayernLB, WestLB AG and HSH Nordbank AG is compatible with European law, Der Spiegel reported on Sept. 25, citing a letter from the institution to Germany’s deputy finance minister Joerg Asmussen. The European Central Bank considered activating the euro- region’s rescue fund to assist Ireland in refinancing debt, German newspaper Handelsblatt reported, citing unidentified government officials. Various euro-area countries had already been told to raise money on Ireland’s behalf if the need arose, the newspaper said, without giving more details. In the end, the authorities decided against the plan, it said. Yuan Strength “If we ran into a situation where one of the peripheral countries would have to tap” financial aid, “the market would again play on the topic of implementation risk very much,” said Ulrich Leuchtmann, head of foreign-exchange strategy at Commerzbank AG in Frankfurt. The euro has declined 6 percent versus the dollar this year amid investor concern countries from Greece to Portugal would struggle to service their debts. The yuan climbed for a 10th straight day even as the People’s Bank of China set a weaker reference rate for the first time since Sept. 8. U.S. lawmakers will vote on Sept. 29 on whether American companies should petition for higher duties on imports from China. The yuan rose 0.1 percent to 6.7009 per dollar, from 6.7079 on Sept. 21, according to the China Foreign Exchange Trading System. It earlier touched 6.6950, the strongest level since the central bank unified official and market exchange rates at the end of 1993. Swiss Franc Switzerland’s franc gained 0.2 percent to 1.3243 against the euro and was 0.3 percent weaker against the dollar at 98.58 centimes, after reaching a record 97.80 centimes on Sept. 24. It climbed to an all-time high of 1.2766 per euro on Sept. 8. It’s the second-best performing major currency in the past six months, gaining strength from Eastern European homeowners falling behind on their mortgages and reducing the use of the currency to fund loans. After surging to $847.4 billion in the five years ended September 2008 from $519.5 billion, bank claims denominated in francs dropped to $647.6 billion in the first quarter, according to the latest Bank for International Settlements data. The decline includes consumers from Poland to Hungary who borrowed franc-denominated loans to take advantage of some of the world’s lowest interest rates and are now repaying the debt after the currency’s rally boosted their charges. To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net;

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