By Keith Jenkins and Kristine Aquino Oct. 4 (Bloomberg) -- The euro touched the least in more than a decade versus the yen after European governments signaled bondholders may have to take bigger losses on Greek debt, deepening concern the debt crisis will damp recovery prospects. The 17-nation currency reached an eight-month low versus the dollar before reports tomorrow that economists say will indicate a slowdown in the European economy. Russia’s ruble fell for a fifth day versus the dollar on concern the euro-area debt crisis will hurt oil demand. The Australian dollar declined to the least in more than a year versus the greenback after the Reserve Bank of Australia held its key rate at 4.75 percent. “Greater political indecision in Europe is not highly regarded by the market,” said Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “The safety and liquidity of the dollar seem to be the best port of call in an environment where global growth numbers are being revised down.” The euro was at 101.04 yen at 10:23 a.m. in London from 100.97 yen in New York yesterday. It dropped to as low as 100.76, the least since June 2001. The common currency was little changed at $1.3193 from $1.3176, after touching $1.3146, the weakest since Jan. 13. The ruble fell to 32.81 per dollar from 32.57, bound for its lowest close in mor ethan two years. The Australian dollar slid 0.7 percent to 94.65 U.S. cents. It fell to 94.14 cents earlier, the least since September 20, 2010. The Stoxx Europe 600 Index of shares fell for the third consecutive day, dropping 2.3 percent. The MSCI Asia Pacific index slid 2.2 percent. Chinese financial markets are shut this week for a public holiday. ‘Technical Revisions’ European finance ministers meeting in Luxembourg considered “technical revisions” to a July deal that foresaw investors contributing 50 billion euros to a 159 billion-euro rescue. That “private sector involvement” includes debt swaps and rollovers. “As far as PSI is concerned, we have to take into account that we have experienced changes since the decision we have taken on July 21,” Luxembourg Prime Minister Jean-Claude Juncker, who chairs the group of euro-area finance ministers, told reporters today. “These are technical revisions we are discussing.” The ministers also pushed back a decision on the release of Greece’s next loan installment until after Oct. 13. It was the second postponement of a vote originally slated for yesterday as part of the 110 billion-euro lifeline granted to Greece last year. “Debate about PSI being back on the agenda raises the risk of a disorderly default, with negative connotations for the banking sector,” said CIBC’s Stretch. Goldman Forecasts Goldman Sachs cut its global 2012 economic growth forecast to 3.5 percent from 4.3 percent. The company expects a mild recession in Germany and France and a deeper downturn in the euro area’s periphery over the next few quarters, economists Jan Hatzius and Dominic Wilson wrote in a note yesterday. Goldman also lowered its three-month forecast for the euro to $1.38 from an earlier projection for it to trade at $1.40. The common currency will be at 106 yen in three months, compared with a previous estimate of 108 yen, the bank said in a separate report. A final reading for a services purchasing managers’ index for Germany, Europe’s biggest economy, will confirm that the gauge dropped to 50.3 last month, the least since July 2009, the median estimate of economists in a Bloomberg News survey showed before tomorrow’s report. Retail sales in the euro region probably dropped 0.3 percent in August after a 0.2 percent increase the previous month, a separate survey showed before the data is released tomorrow. Little Progress “There isn’t much progress in containing the sovereign problem, and Europe will possibly slip into recession,” said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest listed bank. “That’s negative for the euro.” Demand for the euro was supported amid speculation its recent selloff was overdone. Japanese Finance Minister Jun Azumi said the euro’s weakness against the yen is “extreme” and isn’t good for the stability of the global economy. The euro’s 14-day relative strength index versus the dollar and the yen were both below the 30-level that some traders see as signaling an asset’s price has fallen too rapidly and may be poised for a rebound. Ruble Weakens “We may see some buying back of the euro given the currency has been oversold,” said Mizuho’s Suzuki. “It’s going to be short lived.” The ruble declined after Urals crude, the main Russian oil blend, fell 1.6 percent to $99.31 yesterday, its lowest close since Feb. 15. The commodity traded little changed today. Australia’s currency weakened against all of its 16 major counterparts after a policy statement by the central bank suggested that an easing of inflation pressures could pave the way for reducing interest rates. “The RBA is opening the door to a rate cut and that should put some downward pressure on the Australian dollar,” said Richard Grace, the Sydney-based chief foreign-exchange strategist and head of international economics at Commonwealth Bank of Australia. “With equity markets continuing to remain very soft, I’d suggest that the Aussie is at risk of falling below 90 cents.” An improved outlook for inflation “would increase the scope for monetary policy to provide some support to demand, should that prove necessary,” RBA Governor Glenn Stevens said in a statement accompanying the board’s decision to leave the cash target unchanged at 4.75 percent. --With assistance from Candice Zachariahs in Sydney, Monami Yui in Tokyo and Fion Li in Hong Kong. Editors: Mark McCord, Matthew Brown To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

Source