The euro was set for the biggest weekly drop versus the dollar in four months on speculation the European Central Bank will lead its counterparts in coordinated monetary easing after cutting the region’s growth forecast. The dollar weakened against 13 of its 16 major peers after President Barack Obama unveiled proposals to create jobs and boost the U.S. economy, damping demand for safer assets. The Australian and New Zealand dollars advanced after a report showed China’s inflation cooled from a three-year high. “There are too many problems in Europe: it will be just a drag on growth,” said Derek Mumford, a Sydney-based director at Rochford Capital, a foreign-exchange and interest-rate risk- management firm. “Europe’s diverse governments, different fiscal policies and all the troubles that come with it will take a toll on the euro in the near term.” The euro traded at $1.3862 at 9:08 a.m. in London from $1.3882 in New York yesterday, having lost 2.4 percent over the past five days, set for the biggest weekly slump since May 6. It was at 107.55 yen from 107.59, poised for a 1.4 percent weekly drop. The dollar was little changed at 77.59 yen, from 77.51. The ECB left its benchmark rate at 1.5 percent and slashed its 2011 growth forecast to 1.6 percent from 1.9 percent and its 2012 projection to 1.3 percent from 1.7 percent at yesterday’s meeting in Frankfurt. Europe’s central bank, the Bank of Japan and the Federal Reserve may implement coordinated monetary-policy easing to tackle weak growth, Morgan Stanley economists wrote in a note to investors on Sept. 7. Obama’s Plan The dollar has slumped 9.8 percent in the past 12 months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency indexes. Obama proposed a jobs plan that includes infrastructure spending, subsidies to local governments and tax reductions. The centerpiece of the plan is cuts in payroll taxes, which cover the first $106,800 in earnings and are evenly split between employers and employees. “We can say that Obama’s plan is seen favorably in the market, boosting risk appetite” and spurring selling of the dollar, said Daisaku Ueno, president of Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest online currency broker. “Expectations for stimulus measures are strong.” Demand for the yen was limited before finance ministers from the Group of Seven nations meet today in Marseille, France, to discuss ways to bolster their economies. Japanese Finance Minister Jun Azumi said before departing from Tokyo that he would appeal to the group to appreciate his concern about excessive yen gains. Shrinking Economy Japan has intervened in the currency markets three times in the past 12 months to weaken the yen, with the last operation being a 4.51 trillion-yen ($58.2 billion) action in August, the largest monthly amount since March 2004. The yen went on to reach 75.95 per dollar on Aug. 19, a postwar record. Japan’s gross domestic product shrank at an annualized 2.1 percent rate in the three months ended June 30, more than the 1.3 percent contraction reported last month, the Cabinet Office said today. The Australian and New Zealand dollars trimmed weekly losses against the greenback after data showed that Chinese consumer price inflation eased last month, curbing speculation policy makers will take further steps to stem cost increases. China’s inflation “will be less of an issue,” said Mitul Kotecha, head of global currency strategy in Hong Kong at Credit Agricole CIB. “We should see more support for the Australian and New Zealand dollars.” China’s consumer prices climbed 6.2 percent from a year earlier in August, the National Bureau of Statistics said in Beijing today. That compared with a 6.5 percent increase in July. China is Australia’s largest trading partner and New Zealand’s second-biggest export market. Australia’s currency advanced to $1.0596 from $1.0576 yesterday, paring its weekly loss to 0.5 percent. The New Zealand dollar bought 83.34 U.S. cents, from 83.09 cents, set for a 1.7 percent drop since Sept. 2. To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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