The euro fell to a six-month low against the dollar on speculation the European Central Bank will cut interest rates amid slowing global growth and a deepening debt crisis. The 17-nation currency declined versus 12 of its 16 major counterparts as German bond yields fell to a record low, while Greek rates climbed to an all-time high. Sweden’s krona strengthened for a fourth day against the euro after a report showed industrial production exceeded economists’ forecasts. “We’ve reached a turning point,” said Simon Derrick, chief currency strategist at Bank of New York Mellon in London. “There should be a shift in demand for the euro with a shift in the monetary-policy stance. Should the euro be offered? Absolutely.” The currency may fall as low as the high $1.20s, he said. The euro depreciated 0.6 percent to $1.3805 as of 10:51 a.m. in London, after dropping to $1.3804, the lowest level since March 11. The currency has fallen 2.7 percent this week, the biggest decline since the period ended May 6. The euro slipped 0.3 percent to 107.26 yen. The dollar gained 0.2 percent to 77.68 yen. The Dollar Index, which tracks the greenback versus the currencies of six U.S. trading partners, gained for a second day, adding 0.4 percent to 76.576. The ECB left its benchmark rate at 1.5 percent and cut its 2011 and 2012 growth forecasts at yesterday’s policy meeting in Frankfurt. Two-year German yields fell as much as five basis points to a record 0.385 percent. The implied yield on Euribor futures for June slid six basis points to 0.96 percent, showing traders added to wagers for lower borrowing costs. Greek Yields Greek debt yields reached record highs as the nation endeavors to show it can reach budget-cutting targets in order to receive financial aid. Spanish and Italian bonds also fell. The euro may decline to $1.30 in the coming weeks, a level unseen since January, as European banks suffer from falling values in their holdings of government debt, according to Stephen Jen, a managing partner at SLJ Macro Partners LLP in London. Many banks would be considered insolvent if forced to mark their sovereign debt to market, he said in a note sent to clients yesterday. The krona appreciated 0.5 percent against the euro to 8.8884, after reaching 8.8799, its strongest level since June 1. Swedish industrial production rose 2.8 percent in July from the previous month, the government said today. Production was forecast to increased 0.4 percent, according to a Bloomberg survey of eight economists. G-7 Meeting Demand for the yen was tempered 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. 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 ($58.1 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. To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; 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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