The euro stayed near a two-month low versus the dollar as concern the sovereign-debt crisis will spread pushed down bonds from the region’s high-deficit nations. The euro weakened against the Swiss franc after Ireland’s debt rating was lowered two steps by Standard & Poor’s, with a negative outlook. The 16-nation currency fell even as the Ifo institute’s index of German business confidence unexpectedly surged to a record high. Australia’s dollar rallied after its steepest drop this month on optimism the nation’s growth will weather Ireland’s debt crisis and Korean tensions. “Euro sentiment is very bearish and not really following the data,” said Daragh Maher, deputy head of global foreign- exchange strategy at Credit Agricole Corporate & Investment Bank in London. “It’s more the unease about the structural issues. The euro is basically priced to the weakest link.” The euro slipped 0.1 percent to $1.3354 at 11:23 a.m. in London, after reaching $1.3285, the weakest level since Sept. 22. It traded at 111.18 yen versus 111.16 in New York yesterday. Against the franc, the euro depreciated 0.1 percent to 1.3313. The euro has fallen 3.9 percent this month against the dollar as German Chancellor Angela Merkel’s demand for a crisis- resolution mechanism that forces bondholders to share the cost of future bailouts reignited the region’s sovereign debt crisis. Rising borrowing costs and concern banks may need more backing forced Ireland to request discussions on a rescue package. S&P Cut Ireland led the bonds of the most-indebted euro-region nations lower today as the fallout from its fiscal crisis fanned out through the region. Portugal faced its biggest strike in 22 years in a protest against government austerity measures. Shares of Bank of Ireland Plc and Allied Irish Banks Plc also dropped as the government prepared to inject more capital. S&P cut Ireland’s long-term sovereign rating to A from AA-, it said in a statement. The rating may be lowered again if negotiations over aid from the International Monetary Fund and European Union, or the nation’s budget, fail to ease a funding crunch, S&P said. Irish Prime Minister Brian Cowen said today the government discussed a bailout package of about 85 billion euros ($113 billion) with the International Monetary Fund and European Union and the size hasn’t been decided yet. Finance Minister Brian Lenihan will lay out a four-year deficit-cutting program today. Australian Dollar Australia’s dollar gained versus the greenback and the yen on speculation the global economic recovery remains on track, underpinning demand for higher-yielding assets. Germany’s Ifo institute’s business climate index rose to 109.3 in November from 107.7 the previous month, confounding analyst estimates for a drop to 107.5. U.S. consumer spending rose 0.5 percent in October after a 0.2 percent gain in September, a Bloomberg survey showed before today’s report. “Developments in Ireland and the Koreas won’t change the fact that the global economy is recovering gradually,” said Masashi Murata, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “People should buy the Aussie against the euro. Commodity currencies are set to be bought on dips.” Australia’s currency advanced 0.6 percent to 97.85 U.S. cents, after sliding 1.7 percent yesterday, the most since Oct. 19. The so-called Aussie rose 0.7 percent to 81.46 yen. JPMorgan Chase & Co. said it was “turning bearish” on the yen for the first time in three years as the global economic recovery and central bank stimulus boost demand for risk assets. Japan’s currency will fall against most of its major counterparts in 2011, with larger declines against commodity and emerging-market currencies, wrote Tohru Sasaki, head of Japan rates and foreign-exchange research and Junya Tanase, chief currency strategist, in a note to clients. The yen was at 83.25 per dollar from 83.16 yesterday. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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