The euro dropped from the highest level in almost three weeks against the dollar as Slovakian lawmakers prepared to vote on a plan to retool the euro region’s bailout fund. The dollar rose against most of its major counterparts as falling stocks stoked demand for the most liquid assets. The pound weakened as U.K. manufacturing production contracted for a third month. The 17-nation euro gained yesterday the most in a year against its U.S. counterpart after Germany and France pledged to deliver a plan to support banks. “We are seeing a bit of correction in the euro after yesterday’s move up,” said Chris Walker, a currency strategist at UBS AG in London. “There are some concerns about the Slovakian vote. While the bottom line is that they will eventually approve it, it might be delayed, and that creates more uncertainty.” The euro fell 0.2 percent to $1.3614 at 7:22 a.m. in New York after rising 2 percent yesterday in the biggest gain since July 2010. It reached $1.3699 yesterday, the highest level since Sept. 21. The shared currency dropped 0.3 percent to 104.33 yen. The dollar was little changed at 76.64 yen. Sterling slid for the first time in three days versus the dollar after a report showed Britain’s manufacturing fell in August more than economists forecast, adding to signs that the recovery continued to struggle. Britain’s Output Factory output fell 0.3 percent from July, when it slid a revised 0.2 percent, the Office for National Statistics said today in London. The median forecast of 24 economists in a Bloomberg News survey was for a drop of 0.2 percent. Overall industrial output, which includes mining and oil and gas, rose 0.2 percent. “Attention is once again returning to U.K. fundamentals, and the outlook is not encouraging,” said Elizabeth Gregory, a market strategist in Geneva at Swissquote Bank SA, a unit of the financial and trading-services company Swissquote Group. The pound fell 0.2 percent to $1.5638 and was little changed at 86.97 pence per euro. The Stoxx Europe 600 Index decreased 0.8 percent and futures on the Standard & Poor’s 500 Index expiring in December fell 0.7 percent. Slovakia may approve the euro region’s retooled bailout fund after a political storm that will probably topple Prime Minister Iveta Radicova’s governing coalition. Opposition Party The nation’s largest opposition party, which pledged to reject the motion today, will back the revamped European Financial Stability Facility in a second vote if lawmakers fail to approve it today, Robert Fico, the group’s leader, told reporters today in the capital, Bratislava. That would give the measure a majority. There is no date set for a repeated vote. The nation is the only member of the euro area that hasn’t ratified the measure, following approval in Malta yesterday. “There could be a sell-off of the euro if we get a ‘no’ vote,” Friend said. “It has moved up a lot in a week.” Germany and France on Oct. 9 set a deadline for a breakthrough in handling Europe’s sovereign-debt crisis. German Chancellor Angela Merkel and French President Nicolas Sarkozy put recapitalization of the region’s banks at the top of the priority list in a joint declaration in Berlin. Sarkozy said they would deliver a plan by the Group of 20 meeting on Nov. 3. ‘Point of Concern’ “The euro is still a major point of concern for global markets,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “We’ll still have to deal with a number of issues which are yet to be resolved. It’s hard to imagine that over the next month that all these will be resolved adequately.” European Central Bank President Jean-Claude Trichet said Europe’s debt crisis now threatens the region’s financial system. “The crisis has reached a systemic dimension,” Trichet told lawmakers in Brussels today in his capacity as head of the European Systemic Risk Board. The Swiss franc fell against most of its major counterparts, reversing yesterday’s gains. It slid 0.9 percent to 91.20 centimes per dollar and declined 0.6 percent against the euro to 1.24. IntercontinentalExchange Inc.’s Dollar Index, a gauge of the greenback against the currencies of major U.S. trading partners, advanced 0.4 percent to 77.794 before the Federal Reserve’s release tomorrow of minutes of its September meeting. The central bank said last month it will buy $400 billion of bonds with maturities of six to 30 years through June while selling an equal amount of debt maturing in three years or less under a program known as Operation Twist. The U.S. currency has gained 4 percent in the last three months, making it the second-best performer after the yen among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen has gained 9.4 percent. To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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