The euro fell for a second day versus the dollar as concern over Ireland’s budget deficit and a political challenge to Greece’s prime minister curbed demand for the region’s assets. Europe’s currency weakened versus 13 of its 16 major counterparts before European Union Economic and Monetary Affairs Commissioner Olli Rehn arrives in Dublin today to confer with policy makers on spending cuts and tax increases. The extra yield that investors demand to hold Ireland’s debt rather than German bunds has more than doubled in the last three months. South Korea’s won fell, ending a five-day gain, on speculation policy makers will implement steps to curb currency volatility. “The recent blow out in euro area peripheral country government bond spreads relative to bunds is starting to weigh on the euro,” said David Forrester, a currency economist at Barclays Capital in Singapore. The euro slid to $1.3935 at 6:50 a.m. in London from $1.4032 in New York last week, after reaching $1.4282 on Nov. 4, the highest since Jan. 20. The 16-nation currency fell to 113.18 yen from 114.03. The dollar traded at 81.21 yen from 81.26. Australia’s dollar declined to $1.0115 from $1.0159 on Nov. 5, when it climbed to $1.0183, the strongest since exchange controls were scrapped in 1983. EU’s Rehn Rehn will be in Dublin for two days after the Irish government laid out a plan last week to cut spending and raise taxes by as much as 6 billion euros ($8.4 billion) in 2011. German Chancellor Angela Merkel said last week that European bondholders should share the cost of any restructuring, rather than leaving taxpayers “on the hook.” The difference in yield, or spread, between 10-year Irish bonds and similar-maturity benchmark German bunds has risen to 521 basis points on Nov. 5 from 237 points on Aug. 6, according to data compiled by Bloomberg. “People are a little bit worried about sovereign debt in Greece, Ireland and Portugal,” said Derek Mumford, a Sydney- based director at Rochford Capital, a currency and rates risk management firm. “Certainly there has been some selling-off of the euro and buying of the U.S. dollar.” Greek candidates backed by the socialist Pasok party will win eight of 13 regional authorities, according to projections from the Interior Ministry yesterday. Prime Minister George Papandreou has called the vote a test of support for his government after it reduced wages and pensions to secure a 110- billion-euro rescue package. The New Democracy party is ahead in the other five regions in the first round of elections, according to Yannis Karakadas, the chief of Singularlogic SA, which is running the vote count. Raimund Muecke For Raimund Muecke, the euro’s 17 percent surge against the dollar over the past five months signals a return to the days when a thriving Germany and an appreciating deutsche mark meant a robust Europe. “A strong euro is good for Germany,” said Muecke, 63, who along with his wife was babysitting his grandson last week at a farmer’s market on the Konstablerwache in Frankfurt. “If Germany is doing well, others do well too.” Foreign-exchange traders agree. The euro rose above $1.42 last week from a four-year low of $1.1877 on June 7 as investors discounted the chance that fiscal crises from Ireland to Greece will lead to defaults, fracturing the currency. Like the mark before it, the euro is reflecting Germany’s export-fueled growth. Goldman Sachs Group Inc. predicts the euro will strengthen to $1.55 in a year. South Korea’s won fell the most in a week as Lee Hoo Myung, director of the foreign-exchange policy division at the finance ministry, said on Nov. 5 that “appropriate action” will be taken if banks violate currency-derivative trade rules. G-20 Summit Leaders of the Group of 20 nations meet in Seoul this week to discuss last month’s pledge to avoid “competitive devaluation” of their currencies. Asia-Pacific leaders meet in Yokohama, Japan on Nov. 13-14. South Korea announced a cap on foreign and domestic banks’ currency derivatives in June, which will require them to cut their holdings to a specified amount of equity capital by October 2012. The finance ministry today denied a report by Yonhap News that said the government plans to further tighten limits on the use of currency derivatives by foreign banks starting in January. The won slid 0.5 percent to 1,113.22 per dollar, set for the sharpest decline since Oct. 27. New Zealand’s dollar dropped from near the strongest since April 2008 after a vine infection was discovered at a kiwifruit orchard. Testing is under way to determine whether the infection is a bacterial kiwifruit vine disease, Biosecurity Minister David Carter said in an e-mailed statement. “The headline about kiwifruit disease may have caused some selling on concerns about the export impact,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “Still, the fruit only accounts for about 2.5 percent of merchandise, so the long-term implications are small.” New Zealand’s dollar dropped to 78.97 U.S. cents from 79.55 after touching 79.76 on Nov. 4, the strongest since April 2008. To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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