The euro fell to an eight-month low against the dollar as European finance ministers weighed the threat of a default in Greece, which is making fresh budget cuts to secure an international bailout. The 17-nation currency slid after weakening in the third quarter the most since June 2010. The yen rose against the dollar on demand for a refuge as sentiment at Japan’s biggest manufacturers remained below levels seen before a record earthquake struck in March. The pound sank against its major counterparts even as manufacturing unexpectedly increased. “The key question will be whether Greece has done enough to secure the next tranche of its bailout fund,” said Jane Foley, a senior currency strategist at Rabobank International in London. “The concern about the euro-zone crisis, layered on top of poor growth expectations, weighs on the euro.” The euro depreciated 0.6 percent to $1.3311 per dollar at 8:52 a.m. in New York, from $1.3387 on Sept. 30, after declining to $1.3310, its lowest level since Jan. 18. The euro decreased 0.8 percent to 102.28 yen, from 103.12. The dollar slid 0.3 percent to 76.84 yen. The seven-day relative strength index for the euro fell to 25.8, staying below the 30 level for the second consecutive day. A reading below 30 indicates an asset’s price may have fallen too fast and may be due for a rebound. Euro Net Shorts The difference in the number of wagers by hedge funds and other large speculators on a drop in the euro versus those on a gain -- so-called net shorts -- climbed to 82,473 in the week ended Sept. 30. That’s up from 79,460 a week earlier, statistics from the Washington-based Commodity Futures Trading Commission showed Sept. 30. Traders that expect the dollar to strengthen against the euro, yen, pound, Swiss franc and Mexican peso, as well as the Australian, Canadian and New Zealand dollars, surged to 128,155 contracts on Sept. 27, the most since June 2010, according to CFTC data as compiled by Bloomberg. European Union Economic and Monetary Affairs Commissioner Olli Rehn told reporters an option for including the European Central Bank in leveraging of the euro area’s temporary bailout fund will be on the table when finance ministers meet today in Luxembourg. Today was the original target date for approving an 8 billion-euro ($10.7 billion) loan payment to Greece, the sixth installment of the 110 billion-euro lifeline assembled in May 2010. That decision was pushed back until mid-October as Greek Prime Minister George Papandreou tries to close a deficit gap. Greek Budget Greece’s government approved 6.6 billion euros of austerity measures, including firing state workers, the Finance Ministry said yesterday. Europe’s “crisis will probably be stretched for many, many months,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “A crisis prolonged means the euro will keep sliding. A full bailout and the stemming of contagion coming out of Europe require a lot of money, certainly more than the 440 billion euros that they’ve agreed on so far.” The yen climbed against the dollar after the Bank of Japan said today its quarterly Tankan index of sentiment increased to 2 in September from minus 9 in June. The reading was below the reading of 6 in March, encouraging investors to take refuge in Japan’s currency. The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, gained as much as 0.8 percent to 79.154, the highest level since Jan. 20. Manufacturing Data Manufacturing in the U.S. probably expanded in September at the slowest pace in more than two years, economists said before a report today. The Institute for Supply Management’s factory index was little changed at 50.3 last month from 50.6 in August, according to the median forecast in a Bloomberg News survey. A level of 50 is the dividing line between growth and contraction. The pound fell against all its major counterparts excluding the South Korean won as traders judged a surprise increase in U.K. manufacturing as insufficient to keep the Bank of England from providing further stimulus for the economy. Bank of England policy makers said in minutes of last month’s policy meeting on Sept. 8 that it is becoming “increasingly probable” that another round of government-bond purchases may be needed to boost the economy. To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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